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Financial crisis in Pakistan

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Financial crisis in Pakistan

 According to the data released by the Pakistan Bureau of Statistics, the production of major industries has been declining for 7 consecutive months of the current financial year, especially the production process in the export textile industry is slow. A decline in exports indicates that the overall economic growth rate will fall in the coming months. A large number of people are expected to become unemployed due to the reduction in the production activities of major industries. It is estimated that the fourth quarter of FY 2022-23 will be the most affected.

 This is due to the removal of energy subsidies for industries and higher raw material prices and higher energy costs due to the devaluation of the rupee. The IMF recently revised down Pakistan’s economic growth forecast to 0.5 percent for fiscal 2023. The World Bank, Asian Development Bank have also expected the growth rate to be 0.4 percent and 0.6 percent respectively. Production of major industries fell 11.6 percent on an annual basis in February, 7.9 percent in January and 3.51 percent in December 2022. Similarly, the negative growth rate was 5.49 percent in November 2022, 7.7 percent in October 2022 and 2.27 percent in September 2022.

 While a modest growth of 0.30 percent was recorded in August, the production of major industries declined by 1.67 percent in July, the first month of the current fiscal year. The production of the textile sector shrank by 30.74 percent compared to the previous year, negative growth in yarn. 30.10%. Petroleum products registered a negative growth of 16.06% in March, mainly due to decline in production of petrol and high diesel while production of all petroleum products except jet fuel, kerosene, jute and bleaching oil slowed down. 24.68% decline was observed in the auto sector in March

 Production of almost all types of vehicles fell, except for diesel engines. Iron and steel production also fell by 5.07 percent in March. At this time, almost all the economic indicators of Pakistan have turned negative. But the government is neither interested in explaining the reasons for this nor does it seem to suggest solutions. This situation is alarming.

 Apart from this, the remittances in Pakistan’s economy, i.e. the money sent by Pakistanis living abroad, have the status of oxygen in the life of the country and it helps in increasing the country’s foreign exchange reserves and reducing the current account deficit. plays a very important role. It can be estimated that in the last fiscal year, Pakistan, a country with a population of more than 22 million, exported a total of 30 billion dollars, while 9 million Pakistanis living abroad during this period. Remittances of around $30 billion to Pakistan helped reduce Pakistan’s current account deficit.

 Due to which the deficit at the end of the last financial year was 17.4 billion dollars. However, the data so far in the current financial year shows that there has been a decrease in remittances from overseas Pakistanis. This is due to a Once again the gray market is born. Currently, there is a difference of around Rs 25 between interbank and gray market. Due to which Pakistanis abroad are sending money through hundi instead of banking channels and unfortunately the government is silent on this issue.

 Rather, it is promoting importers by allowing them to collect money from Hundi. Pakistan has to pay 3.77 billion dollars before June, if the remittances continue to decline, the repayment of the debt may become more difficult. As far as the budget is concerned, many stakeholders have complained that the government is going to present the budget on June 9, but unlike the past, no consultation has been done this time.

 Which has increased the fear that this budget will be an IMF document. The question is that even after the conditions of the IMF have been met, the agreement has not been reached. Will presenting the budget according to them lead to an agreement? On one hand, the government wants to sign an agreement with IMF and on the other hand, relief is being given on petroleum products. The finance minister is holding meetings with the IMF and the energy minister is saying that if the IMF agreement is not reached, Pakistan’s dependence on China will increase. But Wazir Sahab probably does not know that the decision to support Pakistan has to be made by China and not by Pakistan.

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