Because of the devaluation of the rupee, Pakistani migrants prefer to transfer money through informal channels. The budget presented by the government does not convince the International Monetary Fund. Meanwhile, as the army tries to block Imran Khan from running in the elections, Jahangir Tareen – his former businessman ally – founded a new party bringing together those who left the PTI.
Islamabad () – In less than a year, Pakistan lost 3.7 billion dollars in remittances due to the devaluation of the rupee. As a result of increasingly unfavorable exchange rates, Pakistani emigrants, especially those working in the Gulf monarchies, prefer to use informal channels to send remittances home, causing further losses.
This is confirmed by data from the Central Bank of Pakistan, which has been lacking liquidity for months. Due to pressure on foreign exchange reserves, the Pakistani rupee has not stopped depreciating over the past year. according to the newspaper dawn, Pakistanis abroad resorted to unofficial channels to transfer their savings. But remittances are what contribute the most to sustaining Pakistan’s balance of payments: according to World Bank data, transfers from emigrants amounted to 9% of GDP in 2021. Compared to the 28,489 million dollars received in the year previous fiscal, in the last 11 months only 24,831 million have arrived in Pakistan, which represents a drop of almost 13%. Inflation, for its part, reached 38%.
For almost a year, Pakistan, whose foreign exchange reserves are barely enough to cover a month’s imports, has been trying to obtain a payment of more than 1,000 million dollars from the International Monetary Fund (IMF) and unlock access to a package of loans from 6,500 million. But yesterday, two weeks before the deadline to get the loan, the lending institution expressed its dissatisfaction with the budget that the Pakistani government presented last week. Indeed, the IMF had asked Islamabad to implement a series of reforms in order to grant the disbursement.
According to Esther Ruiz Pérez, an IMF expert in Pakistan, the tax amnesty provided for in the budget program further reduces the equity of the tax system, reducing the resources allocated to the most vulnerable and setting “a damaging precedent.” Nevertheless, hinted that until the end of the month it will be possible to “perfect the budget” before the Extended Fund Facility expires, on June 30. According to Moody’s rating agency, if the bailout program fails, the country will face an economic default.
Meanwhile, the crackdown on supporters of Imran Khan, the former prime minister who was impeached in April last year after falling out of favor with the army, continues. In recent weeks, at least 100 members of the Pakistan Tehreek-e Insaf (PTI), including several former ministers, have announced their resignation from the party. Commentators and analysts agree that the army – which has always controlled and coordinated Pakistani politics – is trying to prevent Khan from running in general elections scheduled for October. Until now, the former cricket star had managed to mobilize the masses in favor of him: on May 9, after he was arrested by the police, groups of rioters attacked government headquarters and institutions. In response, the military searched the homes of PTI supporters several times a day and were accused of intimidating several party members by holding them incommunicado without complaint, a practice that security forces had also used in the past.
Last week, a businessman and former ally of Imran Khan, Jahangir Tareen, founded a party (Istehkam-e-Pakistan Party) in which all the PTI defectors have come together. Although at the moment it is not clear whether or not Khan will be disqualified from the elections, despite the popular support, his chances of victory are practically nil.
