Pakistan’s economy is continuously sinking after Imran Khan became the Prime Minister. The data released by the State Bank of Pakistan on Friday has increased the concern of the whole country. At the same time, Imran Khan is constantly taking loans from the World Bank and International Monetary Fund. As of December 31, 2020, Pakistan had a total debt of $ 115.756 billion.
Pakistan’s current account deficit widens to $1.6 billion
The State Bank of Pakistan has said in its new report that in October this year, Pakistan’s current account deficit has increased to a record level of $ 1.6 billion. This figure is much higher than in September. It is being said to be 4.7 percent of the GDP of Pakistan. The government of Pakistan had set a target of keeping the current account deficit at two to three per cent of GDP this year, but it has crossed all limits and has reached almost two times the target.
Due to this the economic deficit of Pakistan increased.
The biggest reason for the increase in the current account deficit in Pakistan is believed to be the increasing imports. During the Corona crisis, Pakistan has imported a large number of goods from abroad. The State Bank of Pakistan has reported that from July to October, Pakistan’s total imports increased by 66.3 percent to $23.484 billion. Last year i.e. in 2020, during July to October, this figure was $ 14.118 billion.
what is current account deficit
Current account shows the inflow of foreign exchange on account of exports and imports. If it is negative then it is called Current Account Deficit (CAD) and if it is positive it is called Current Account Surplus. There are mainly three types of transactions done through current account. First- import-export of goods and services, second- income-expenditure from employees and foreign investment, third- money coming into the country through grant money, gifts and workers settled abroad.
Pakistan is facing serious economic crisis
According to the report of Pakistani newspaper The News International, the country is going through a serious economic crisis. The Imran government needs $51.6 billion in foreign financial aid within the next two years to meet its needs. The newspaper said that in the year 2021-22, Pakistan will need $ 23.6 billion and in the year 2022-23, $ 28 billion.
Pakistan is one of the countries with the highest foreign debt
This development comes at a time when the International Monetary Fund has made very conservative projections about Pakistan. Pakistani officials are now busy in making a final agreement with the IMF to get the loan. Pakistan wants to take loan from IMF so that it can meet its foreign funding needs. The World Bank in its recent report had acknowledged that Pakistan has joined the list of 10 countries in the world that have the highest foreign debt.
Companies downgrading Pakistan’s credit rating
Meanwhile, it is feared that the credit rating agencies may further downgrade Pakistan’s rating, which will make raising money by issuing international bonds more expensive for it. Pakistan is not able to complete its project fast due to which it is not getting full money from World Bank and ADB. For this reason, now the IMF is imposing strict conditions on Pakistan.