Pakistan is currently facing a tough economic situation as funds are running low, inflation is skyrocketing and the economy is struggling to stay afloat. Unlike Sri Lanka, Pakistan is reluctant to choose debt restructuring, but it is having a major impact on the country. In the first half of this fiscal year, there has been a significant increase of 77% in the cost of interest. This has led to the government making cuts in all expenses, except for defense. Development expenses have also been reduced by 50%.
The Finance Ministry had budgeted over 17 billion dollars for interest expenses, but it has already consumed 65% of that amount in just six months. The Monetary Policy Committee of the Central Bank is scheduled to meet today, but it looks like a vicious circle at this point. High inflation rates, mounting national debt, and ever-decreasing foreign reserves are just some of the issues that Pakistan is currently facing.
The government, led by Prime Minister Imran Khan, is trying to reach out to its allies for help, but there is only so much they can do. The country’s foreign exchange reserves have also been hit by the economic crisis, falling to a five-year low. The government has been forced to turn to the International Monetary Fund (IMF) for a loan to stabilize the economy.
Experts believe that the root cause of Pakistan’s economic crisis is the country’s inability to control its expenditure. The government has been spending more than it has been earning, leading to a widening trade deficit. Additionally, the country has been struggling to increase its exports, which has further exacerbated the situation.