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Pakistan to face full-fledged financial crisis by end of fiscal year

According to a report released Friday, if the International Monetary Fund’s (IMF) program is not revived by the end January or early February of this year, a full-fledged crisis could be looming for Pakistan’s economy.

According to Policy Research Group, Pakistan will need to repay a large amount of 8.638 trillion USD in foreign loans during the second half of the current fiscal year.

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In the rupee terms, the rate of foreign loan repayments has increased by 399 percent in the past four years. In 2017-18, it was Rs 286.6 billion. It is now estimated to be Rs 1,427.5 million.

According to it, Pakistan was required to repay foreign loans in dollars, including the principal and the mark-up.

It stated that if the International Monetary Fund program is not revived by the end January or early February 2022 then a full-fledged crises will be brewing in Pakistan’s economy.

The State Bank of Pakistan (SBP), which holds 17.6 billion USD of foreign currency reserves, despite receiving large dollar inflows of $3 billion USD from Saudi Arabia, more than 2 billion USD from IMF and 1 billion USD through International Eurobond during the first half (July–December) period, has a yawning Current Account Deficit.

In July 2021, the SBP had 17.8 billion USD foreign currency reserves. According to Policy Research Group, foreign currency reserves were not able to be built up despite dollar inflows of approximately 6 billion USD in the first six month of the current fiscal year.

Pakistan’s current financial problems are exacerbated by its high trade deficit. Inflation is on the rise and the government had to create a mini-budget in order to raise taxes to meet the IMF’s demands.

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