Friday, 19 Apr 2019

After Turkey and Argentina, now Pakistan is in the edge of monetary crisis


Imran KhanImran Khan - After Turkey, Brazil, South Africa and Argentina, Pakistan is also currently on the verge of a monetary crisis. The recently appointed Pakistani Prime Minister, Imran Khan, faces considerable debt payments, and has even eroded half of his foreign exchange reserves in recent years.

Pakistan needs help of USD 12 billion to avoid defaulting on debt. One option is to ask for assistance from the International Monetary Fund (IMF) so that it can settle its debts, one of the biggest is to China.

According to Economist Institute for Development of Economics and Finance (INDEF) Dzulfian Syafrian in 2017, Pakistani economy (5.3%) actually grew higher than Indonesia (5.1%), although it was still below Turkey (7.4%) which now has entered its economic crisis.

"But they still collapse anyway. So, the high economic growth does not guarantee freedom from the dangers of the monetary crisis. How come it can? The answer is simple, because the economic growth of Pakistan, like Indonesia today, is built on sand. The foundation is fragile, can collapse anytime" he said in a written statement on Monday, September 10th 2018.

So what is the main reason? Like Indonesia, the Pakistani economy also relies heavily on the consumption of imported non-productive goods and the development of rural infrastructure which came from foreign debt. "As a result, when United States (US) dollar strengthens, their US dollar reserves are increasingly depleted because they are used to counteract the weakening of their currencies" he explained.

According to him, this narrative is really similar to what Indonesia is currently experiencing. Indonesia's US dollar reserves have also been depleted since January 2018. "Fortunately, like a stronger football team, we have stronger foreign exchange reserves than Pakistan" he added.


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