Dollars are running away

Sri Lanka is passing through a foreign currency crisis. This is what happens when dollars run away from a country: 7-hour loadshedding, a free fall of the currency, medical emergency, shortage of life-saving drugs, shortage of medicines, inflation, shortage of foodstuff, lack of fuel, shortage of paper for school examinations, shortage of plastic to issue driving licenses and street protests. In Lebanon, the army “scrapped meat from the meals offered to on-duty soldiers, because of rising food prices.”

Creditors are running away from Pakistan. The International Monetary Fund (IMF) will not be disbursing its next tranche of $955 million out of the $6 billion Extended Fund Facility (EFF). The staff mission has informed our Ministry of Finance that they will not be taking Pakistan’s case for the next tranche to its executive board. Our gross external financing requirement for the year stands at a tall $32 billion but our creditors are running away. Our trade deficit is about to hit a high of $45 billion but our creditors are running away. Our current account deficit is about to hit a high of $20 billion but our creditors are running away.

The IMF deals with governments and, unfortunately, Pakistan does not have a government. The IMF says it will “continue supporting Pakistan once a new government is formed.” According to Dr Miftah Ismail, the PMLN leader, “Pakistan’s new finance minister will first renegotiate Pakistan’s $6 billion IMF programme.”

In February 2021, our Ministry of Finance made certain commitments with the IMF. In March 2021, our Ministry of Finance received $500 million. In April 2021, our Ministry of Finance reneged on its commitments. In January 2022, our Ministry of Finance made certain commitments with the IMF. In early February 2022, our Ministry of Finance received $1 billion. In late February 2022, our PM reneged on our commitments with the IMF.

The SBP is left with a paltry $12 billion, two months’ worth of imports. The SBP’s external debt payments are going to be $17 billion. This is when we need the IMF the most. This is when the IMF is running away.

Foreign buyers are running away from Pakistan. We export $3.5 billion worth of bed linen, table linen, toilet linen and kitchen linen. We export $1.7 billion worth of non-knit men’s wear. We export $1 billion worth of non-knit women's wear. Two-third of our exports are cotton related-and our single largest export market is the United States. Red alert: American buyers are feeling uncomfortable. American buyers are telling their Pakistani suppliers that they are looking at moving their supply chains from Pakistan to Africa and Latin America.

Our imports are about to hit a high of $75 billion. This is when we need our exports to rise. This is when foreign buyers are running away. Foreign investors are running away from Pakistan. In 2007, foreigners invested $5.59 billion, the highest ever. Currently, foreign direct investment (FDI) hovers around $2 billion a year. In March, year-on-year FDI dropped 33 percent. Contrary to the trend, FDI from the United States increased from $84 million last year to $175 million this year. Dollars are running away from Pakistan. Albert Einstein once remarked, “I never think of the future — it comes soon enough.”