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HomeNewsIMF Visits as Pakistan Inflation Hits 48-Year High

IMF Visits as Pakistan Inflation Hits 48-Year High

IMF Visits as Pakistan Inflation Hits 48-Year High

According to data released on Wednesday by the country’s statistics bureau, inflation has reached a 48-year high in crisis-hit Pakistan, where the International Monetary Fund is holding emergency talks.

Year-on-year inflation was 27.55 percent in January 2023, the highest since May 1975, with thousands of containers of imports held up at Karachi port.

Pakistan’s economy is in shambles, suffering from a balance-of-payments crisis while attempting to service massive amounts of external debt. The world’s fifth-largest population has less than $3.7 billion in the state bank, which is only enough to cover three weeks’ worth of imports.

An IMF delegation arrived in Islamabad on Tuesday to restart talks with the government about a stalled bailout package, which has so far refused to meet the global lender’s stringent conditions.

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However, with the prospect of national bankruptcy looming and no friendly countries willing to offer less painful bailouts, Islamabad has begun to yield to pressure in recent days.

The government relaxed currency controls to rein in a rogue black market in US dollars, causing the rupee to plummet to a record low.

Petrol prices, which were previously artificially low, have also been raised.

Except for essential food and medicines, the state bank no longer issues letters of credit, resulting in a backlog of thousands of shipping containers at Karachi port stuffed with stock the country cannot afford.

‘One cannot earn enough money.’

The import ban and massive rupee devaluation have wreaked havoc on the industry. Government construction projects have been halted, textile factories have been partially closed, and domestic investment has slowed.

According to figures released on Wednesday, the National Consumer Price Index for January 2023 increased by 2.88 percent from the previous month.

On Monday, dozens of day laborers, including carpenters and painters, waited in downtown Karachi with their tools on display for work that never came.

“The number of beggars has increased while the number of laborers has decreased,” said Zafar Iqbal, a 55-year-old mason eating biryani from a plastic bag donated by a passerby. “Inflation is so high that no amount of money can be earned.”

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Former Prime Minister Imran Khan, who was deposed in a no-confidence vote last year, negotiated a multibillion-dollar IMF loan package in 2019.

However, he broke promises to reduce subsidies and market interventions that had helped to cushion the cost-of-living crisis, causing the program to stall.

It is a common pattern in Pakistan, where the majority of the population lives in rural poverty, with more than a dozen IMF deals brokered and then broken over the decades.