Pakistan is grappling with a deepening dollar crisis, resulting in a complete halt in the import of food and beverages. This situation has led to thousands of containers being stranded at ports, incurring fines and additional charges for the traders.
The lack of sufficient foreign exchange, which the Pakistan State Bank (PSB) has not been able to provide, is further aggravating the country’s economic challenges.
The commercial dealers across the country have been forced to suspend imports due to the unavailability of dollars, said Farhat Siddiqui, Secretary of Karachi’s Wholesale Grocers Association Society. Banks have refused to provide them with the necessary foreign currency.
The association held a meeting and decided that importers should inform their indenters that no shipment should be dispatched after June 25.
Reasons behind Pakistan’s dollar crisis
The dollar crisis in Pakistan primarily stems from the depletion of the country’s foreign reserves over the past year. The economy suffered a severe blow due to devastating floods in northwestern Pakistan, followed by disruptions in oil supplies during the Russia-Ukraine war, which resulted in difficulties in paying high tariffs on imported oil.
The economic condition worsened amid a political crisis when Imran Khan was voted out of office in April 2022. The new Prime Minister, Shehbaz Sharif, faced struggles in arranging loans, leading to his frequent visits to Saudi Arabia and the United Arab Emirates (UAE) in search of much-needed bailout packages.
High inflation and economic challenges
Pakistan is grappling with a 50-year high inflation rate, pushing nearly one-third of its population to the brink of poverty. In April, the government had to establish centers for the distribution of free wheat flour to alleviate people’s burden amidst skyrocketing prices. However, the scheme faced setbacks as stampedes occurred at these centers, resulting in several fatalities.
Pakistan’s GDP is the lowest among neighboring countries, with only war-torn Afghanistan having a weaker economy. Unemployment and inflation rates in Pakistan are among the highest in the region. The country’s ranking on the Human Development Index is 161st out of 185 countries, as measured by health, knowledge, and standards of living. Food shortages and transportation challenges caused by floods and the Ukraine war have further contributed to inflation.
