Economic mess.

Byline: AROOJ ASGHAR

Pakistan's economic crisis is deepening, with the Pak rupee hitting its lowest level in history against the US dollar, foreign exchange reserves are running out, the state has cash only to pay for the vital imports that too the import bill of few days only. IMF is in standoff with the government on various known and unknown matters. IMF has asked for structural reforms, which should have been done a long time back, though it's late, yet it should be done now so as to revive the economy. On top of that, Pakistan faced the worst flood in living memory, which had actually put half of the country under water and now untimely rains have destroyed most of the wheat crop. The deep political divide in the country is mainly driven by self-interest, where high inflation is adding fuel to the political tussle. These are examples of a few of the current crises Pakistan is facing.

Banks in Pakistan are neither opening new letters of credit nor are they honoring previously opened letters of credit, thus there is a shortage of imported items as well in the country. Banks are discouraging importers due to a shortage of US dollars in the country. For the last couple of years, Pakistan is importing wheat, where the country was once a net exporter of wheat. This is just one example to understand how bad things are now in the country of the economy's weakness.

The rupee has tumbled against the dollar; in just one year it has gone from Rs. 154 to 295 against its counterpart. One of the fundamental reforms, IMF has been asking Pakistan to have a single exchange rate policy, Pakistan currently has three different exchange rates; one is being followed by the banks, the other is being managed by the currency traders in the market and the third is the notorious Hawala system. Pakistan has finally come out of the gray list of FATF yet it is unable to control the Hawala system.

Pakistan gets most of the foreign remittances from the US, UK and the Middle East, therefore, the Government of Pakistan should engage these countries to crush the Hawala system. With the black market in place, the Afghans buy US dollars from the market even by paying a premium and then take that to Afghanistan. This is another area, where government officials know everything yet they are unable to control the smuggling for some unknown reason.

State-owned entities in trouble

Pakistan's foreign exchange reserves are at an all-time low. In order to secure future financing...