Earlier this week the International Monetary Fund deposited a much-awaited first installment of $1.2 billion in Pakistan’s central bank. The financial infusion was part of a $3 billion new bailout deal that the beleaguered country secured earlier this month after making a slew of changes to comply with conditions set out by the IMF. Recent reports however indicate that Pakistan incurred a massive $ 8.3 billion loss in remittances and exports during the last financial year.
According to a report by Dawn, the Shehbaz Sharif-led government had made extensive efforts to appease the IMF since taking over in April last year. The lack of attention to these two big inflows has led the country to lose considerably more than it received from IMF borrowings and inflows from other sources.
Simply put, Pakistan received a nine-month USD 3 billion loan package for FY24 in exchange for a massive tax burden, historically high-interest rates, and record inflation and currency depreciation in FY23.
Despite the month-to-month decline in the remittances, the government remained busy with the IMF for loans while it has been losing interest-free inflows without any strings. Attention was needed to address the declining trend but it looks borrowing was more important,” Atif Ahmed – a currency dealer and expert in the interbank market – told the publication.
Reportedly remittances declined by 13.6% – from $ 31.278 billion in FY22 to $27.024 billion last year. Interest-free inflows also fell as the government continued to remain focused on IMF financing. The growth trajectory was lost in FY23 even as more than a million Pakistanis left the country for jobs mainly in the Middle East. Inflows from those living abroad fell even lower than the USD 29.449 billion received by the government in FY21. It had earlier increased by a record $6.317 billion above the $23.132 billion received in FY20.
At the same time, the exports started declining and finally ended with a decline of 12.7% to $27.74 billion compared to $31.78 billion last year, a net loss of $4.04 billion.
The twin declines resulted in a net cumulative loss of $8.294 billion. The amount is almost equal to 30% of the exports recorded in FY23.