01 Dec 17/Friday.
Pakistan’s foreign exchange reserves fell to $19.693 billion from $19.710 billion within a week ended November 24, as per the data released by the central bank on Thursday. Whereas, the foreign exchange reserves held by the State Bank of Pakistan (SBP) rose $6 million to $13.547 billion, the reserves of commercial banks dropped to $6.145 billion as compared to $6.169 billion. With barely left for two months of reserves Pakistan economy is in dire straits.
Earlier, Pakistan was forced to seek yet another foreign commercial loan of $500 million from the Industrial and Commercial Bank of China (ICBC), to stop official foreign currency reserves from slipping to dangerous levels. However, the same has not helped and currently released figures give a very dismal picture of a failing Pak Economy. Earlier, the finance ministry had informed parliament in June this year that it would obtain $1 billion as commercial loans during 2017-18 that will end in June next year. However, it has already breached the limit with eight months remaining. Pakistan’s debt sustainability indicators have worsened in the past one year and its external debt to foreign exchange earnings ratio has further deteriorated, affecting repayment capacity.
Political Instability in Pakistan has increased the risk further, with Army backed removal of the former prime minister Nawaz Sharif and engineered resignations of Finance Minister and Law Minister. Risks to political stability will remain high in the run-up to parliamentary elections in mid-2018. Despite being ousted from PM’s chair in August, Nawaz Sharif, has been re-elected as president of the ruling PML (N). As per the mood prevailing in Pakistan the party is sure to be re-elected, but corruption charges against members of the Sharif family and growing macroeconomic instability have raised downside risks to this call. Increased politicking by religious and terrorist organization will further vitiate the Pak political scene.
With US withdrawing its commitment to Coalition Support Fund the Pak Army effort against War on Terror is likely to suffer large reverses. To hide their failures, Pak Army is likely to resort to Faizabad like dramas to weaken the PMLN Government. All these developments will weaken the Pakistan rupee sharply in a run-up to 2018 General Elections and thereafter. Coupled with Army’s bungling in all spheres of governance and politics, Pakistan is expected to slide into more chaos and instability.