Pakistan’s inflation rate has now reached 13.37 percent, ranking second in Asia only to Sri Lanka, which recently declared bankruptcy and is currently embroiled in political turmoil. 

Pakistan appears to be on the verge of declaring bankruptcy after failing to secure financial aid from its allies and the International Monetary Fund, and with loan repayments looming.

While the incumbent government is afraid of losing popularity by implementing inflationary policy measures, Pakistan’s economy appears to have no other choice. Furthermore, former Prime Minister Imran Khan, who was deposed on the basis of similar opposition claims, has threatened nationwide protests against soaring inflation and other policy measures implemented by a “imported government.”

Furthermore, as Pakistan repays loans in order to avoid rising interest rates, the State Bank of Pakistan reserves have fallen by $190 million to $10.308 billion, which is enough to cover approximately two months of imports. 

Last month, Finance Minister Miftah Ismail reached an agreement with the International Monetary Fund to extend the long-standing bailout programme by one year and increase the loan size by approximately $2 billion in order to avoid insolvency. The agreement, however, was subject to final modalities, and the IMF instructed Pakistan to implement steep fiscal adjustments, discontinue the amnesty scheme, raise fuel prices, raise power tariffs, and restore taxes before the country could expect to secure the loan.

Following the meeting with the IMF, the Finance Minister advocated revisiting petroleum product prices and reducing subsidies. Prime Minister Sharif, on the other hand, appeared to be only interested in enforcing populist measures and refusing to raise fuel prices. 

Now, with the second stench of the incumbent government’s meeting with the IMF set to begin next week in Doha, the incumbent government will be forced to remove petroleum subsidies on May 15, or the IMF will likely default on extending a fund to support the crumbling economy.

Pakistan’s inflation rate has risen to 13.37 percent, ranking second in Asia only to Sri Lanka, which recently declared bankruptcy and is currently embroiled in political turmoil.

Furthermore, the rupee is trading at its lowest level in history, and the bourse experienced one of the steepest drops in its history, falling 5% in just over two months. Finally, commodity prices are rising, and the weekly sensitive price index, which measures inflation, is up 15.85 percent. 

Asif Ali Qureshi, chief executive officer of Optimus Capital Management Ltd., responded to the incumbent government’s policy inaction by saying Sharif’s “inaction is taking its toll on the economy.” “Political considerations are heavily weighing on the government’s ability to make difficult economic decisions,” he continued.

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