Economy

Another Death Nail In Pakistan's Coffin: Pakistan's oil industry is on the verge of "collapse" due to a liquidity crisis

Is Pakistan going to bankrupt? All the economic parameters are indicated that way.

Pakistan has a massive population of 220 million people and only a $3.082 billion forex reserve, indicating that an import-heavy country is learning to move in the negative direction.

Even World Bank reports show that Pakistan's economy is deteriorating. According to them, Pakistan is the worst-performing economy in Asia, and they reduced Pakistan's growth from 4% to 2% in order to accommodate the country's difficult negotiations with the IMF.

In this difficult time for the country, Pakistani oil companies wrote to Pakistan's Prime Minister, Shahbaz Sharif, pleading for assistance. They claim that Pakistan's oil economy is on the verge of collapse due to a lack of forex reserves at the country's Central Bank.

On Friday, Cnergyeio Refinery shut down its operation for a week due to the non-availability of crude oil.

The oil companies advisory council (OCAC) expressed concern about the depreciation of the local rupee in a letter to the oil and gas regulatory authority (OGRA) and the energy ministry.

Pakistan's currency is in free fall following the Central Bank's removal of artificial restrictions on it in response to IMF pressure. The value of Pakistani currency against the dollar is now, Rs. 276.58 and in the open market, it is around Rs. 283.

When the value of any currency falls sharply, then it indicates that the country's economy is moving at the speed of a rocket toward inflation. When people anticipate that prices will rise, they are more likely to purchase now, before prices rise. This increases demand, indicating to producers that they can safely pass on higher costs. Prices rise even further, and inflation becomes a self-fulfilling prophecy.

Other disadvantages of currency depreciation include a direct impact on the purchasing power of the population. When prices rise, people try to save money for the future, which creates an anomaly in the country's profit balance.

The price increase also impacted the country's balance of payments, resulting in a new crisis known as the balance of payment crisis(BOP). BOP is defined as the total amount of money flowing into a country in a given period as well as the total amount of money flowing out to the rest of the world.

Pakistan is an import-heavy country, spending one-third of its reserves on energy imports from other countries, primarily Gulf countries. If Pakistan does not have dollars or other currency, the country will undoubtedly go bankrupt, and according to the currency and forex balance, a country like Pakistan will only be able to function for 18.5 days.

As a result, the situation in Pakistan is in a situation of make or break; if the country is unable to secure a bailout package from the IMF, the country is doomed.

A country like Pakistan cannot survive in this manner; Pakistanis are abandoning their country on the verge of collapse. According to the Pakistan Bureau of Immigration, at least 8 lakh Pakistanis left the country in 2022 and never return. And there are millions, who are willing to obtain visas from any country and fly away to survive for the rest of their lives.

Pakistan does not need "magic pills" from the IMF to grow; they need proper surgery, which they are unwilling to do because it would destroy the loot of Pakistan's ruling elite, the army, and political leaders.