Pakistan hosts IMF delegation as inflation hits 27.55%

(Karachi) Pakistan, which has been hosting a delegation from the International Monetary Fund since Tuesday hoping for its help, was affected in January by the worst inflation for 48 years, against a backdrop of economic crisis and the fall of the rupee, the national currency.

In January, the rise in prices reached 27.55% year on year, according to the statistics office, a peak not seen since May 1975, at the time of the first oil shock, while the currency crisis caused the paralysis of thousands of containers of imported products in the port of Karachi.

Pakistan’s economy is on the brink of suffocation, with the rupee continuing to depreciate and inflation soaring, amid energy shortages spreading to other commodities.

An IMF delegation arrived in Islamabad on Tuesday to negotiate the disbursement of a new tranche of financial assistance, under a program suspended for months.

The state bank of the world’s fifth most populous country has less than $3.7 billion in reserves, barely enough to cover three weeks of imports.

In recent days, with the prospect of national bankruptcy and no friendly countries willing to offer less painful bailouts, the government in Islamabad has begun to bow to pressure.

The government relaxed controls on the rupee, in response to the development of a rampant black market in US dollars, which caused the rupee to fall to an all-time high.

Artificially low gasoline prices were also raised. The state bank no longer issues letters of credit, except for essential foodstuffs and medicines, causing the port of Karachi to paralyze thousands of containers stuffed with goods that the country can no longer afford.

The industry is reeling from the de facto blocking of imports and the massive rupee drop. Public construction projects have ceased, textile factories have partially closed, and domestic investment has slowed.

In downtown Karachi on Monday, dozens of day laborers, including carpenters and painters, showed, tools in hand, their hope for a job that never comes.

“The number of beggars has increased and the number of workers has decreased,” said 55-year-old bricklayer Zafar Iqbal, who was eating biryanis from a plastic bag given by a passerby.

Former prime minister Imran Khan, ousted last year in a no-confidence vote, negotiated a multi-billion dollar loan package from the IMF in 2019.

But he reneged on promises to cut subsidies and market interventions that had cushioned the cost-of-living crisis, delaying the program tied to IMF support.

This phenomenon is common in Pakistan, where most people live in rural poverty, with more than two dozen agreements brokered by the IMF and then broken down over the decades.