Sri Lanka faces liquidity crunch, Pakistan stares at economic abyss
Despite Sri Lanka getting the first tranche of a US dollar 362 million loan from the IMF, the island nation is facing a liquidity crunch as the loan conditions stipulate no more printing of Sri Lankan currency to curb the inflation and for prudent fiscal management. On March 20, the IMF cleared the 2.9 billion US dollar package for Sri Lanka in eight installments.
It is understood that Sri Lanka has repaid nearly half of US dollar 500 million dollar loan taken for fuel purchases last year, it is quite evident that donor nations including China, Japan and even India will have to take a significant haircut as part of debt restructuring of the island nation.
While Sri Lanka continues to struggle with the ongoing economic crisis after May 20, 2022 default, another Indian neighbour and cat’s paw of China in the Indian sub-continent, Pakistan, is staring at a default with reports indicating that Islamabad will have to cough up $77.5 billion in external debt between April 2023 to June 2026 to iron brother China, private creditors and Saudi Arabia. The external debt is one-fourth of Pakistan's economy of $350 billion.
Even though Pakistan finance Finance Minister Ishaq Dar has assured the nearly bankrupt Islamic republic that it will manage a $6.5 billion package from IMF, Pakistan is facing a serious economic and political crisis with aggravated insurgencies in Balochistan and in Khyber-Pakhtunkhwa regions.
The Pakistan foreign reserves have fallen to $4.2 billion, which is enough to cater for one month of import bill. The USD-PKR exchange rate is touching 280 Pakistani Rupees to a US Dollar and there are food shortages in all provinces barring Punjab, the core of Pakistan.
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