1 December 2023

In a currency exchange office, in Karachi (Pakistan), on January 27, 2023.

Pakistan continues to sink. The foreign currency crisis has affected all sectors of activity, and panic is now gripping manufacturers. The latter are demanding an end to the blocking of imports, fearing the shutdown of whole sections of the economy.

In the ports, for lack of means of payment allowing them to be unloaded, the blocked containers pile up, filled with products essential to the functioning of several key industries: textiles, steel, construction and even the pharmaceutical industry. About forty companies in this sector sounded the alarm on 6 February. Due to the shortage of products, they will soon be forced to stop production, they warned.

“The supply chain has been disrupted. Active ingredients necessary for the manufacture of drugs such as painkillers or antibiotics and other raw materials, representing an amount of 45 million dollars (42 million euros), are currently blocked at the port, for lack of dollars”says Syed Farooq Bukhari, president of the Pakistan Association of Pharmaceutical Manufacturers.

Avoid payment default

Plagued by a shortage of dollars, the country has ” drastically “ reduced imports pending a bailout from the International Monetary Fund (IMF). Foreign exchange reserves stood at 3.2 billion dollars on February 10, just enough to ensure a few weeks of imports. To avoid payment default, the government of Shehbaz Sharif is trying, at all costs, to release a new tranche of financial aid from the IMF of 1.1 billion dollars. The international institution had suspended in 2022 the disbursement of a loan of 6.5 billion granted in 2019, considering that Islamabad had not implemented the necessary reforms.

Read also: Article reserved for our subscribers Pakistan, on the brink of an economic abyss, failed to reach an agreement with the IMF

The conditions imposed by the IMF are draconian. After ten days of intense negotiations, Friday February 10, a delegation of the financial organization had left Islamabad without reaching an agreement. The talks are now continuing remotely. The Minister of Finance, Ishaq Dar, had to agree to impose new taxes supposed to bring in 170 billion rupees (about 603 million euros). Parliament’s vote should take place in the coming days. Natural gas and electricity prices are expected to rise sharply, placing a heavy burden on Pakistani households which are already suffering from record inflation of 27.6%, as well as on industries.

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