Pakistan’s economic crisis deepens, the currency experiences the highest 1-day crash in 20 years

The economic crisis in Pakistan seems to be getting worse by the day. Its currency saw its largest single-day drop in over two decades to 262 against the dollar. After falling 9.6%, it recovered somewhat and is now trading at 242 against the dollar. The slump was so severe that the International Monetary Fund (IMF) resumed lending to the country.

The country has relied on IMF funding to save itself from another drowning, which has a key call for the removal of a cap on the Pakistani rupee-to-dollar exchange rate. Federal Board of Revenue Chairman Asim Ahmed called the country’s current fiscal position “critical,” The Dawn reported.

“Economic situation [in the country] is critical and there is a loss of revenue. We will close the tax gap soon,” Ahmad said during his address at an event held here on Thursday to mark International Customs Day, according to Dawn.

He added that the €The revenue target of 7.47 trillion (Pakistani rupees) would be met as those who did not pay taxes would fall under the tax net, Dawn reported.

Currency experts claim that the resumption of IMF talks and the sharp drop in foreign exchange reserves have kept the rupee under pressure. According to media reports from Pakistan, foreign exchange reserves as of the week ending January 20, 2023 are down to only US$3.68 billion from US$4.601 billion a week ago or January 13, 2023.

It should be noted that Pakistan secured a $6 billion IMF bailout in 2019. After that, the loan was increased by another USD 1 billion last year. The country was hit by devastating floods last year.

However, the lender then suspended disbursements in November last year as the country made no further progress on its fiscal consolidation path.

The lender announced on Thursday that it would send a mission to the country in late January to discuss resuming those disbursements.

(With ANI inputs)

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