
Pakistan’s near-crippling economic crisis appears to be reaching a tipping point. The nation’s foreign exchange reserves are approaching the danger zone, reaching a low of $5.56 billion this month. Inflation has run rampant with the year-on-year rate for perishable food at 56%. Mounting debt and political instability are also threatening to compound the dangers facing Pakistan. Added to these ailments is the aftermath of last summer’s apocalyptic floods that killed 1,700 people. Pakistan’s government has not managed to halt the economic tailspin or even stabilize it. Islamabad’s latest move is centered on saving energy and reducing costs tied to energy production and consumption. The plan is seen as a knee-jerk reaction which reinforces a growing perception among Pakistanis that the government of Prime Minister Shehbaz Sharif is powerless to turn the tide.
The lack of foreign reserves is a major problem and the government recognizes it. Pakistan is looking abroad to Saudi Arabia for help to fortify its foreign reserves and stave off default. General Syed Asim Munir, Pakistan’s army chief of staff is in Saudi Arabia at the moment in his first overseas visit. Munir will visit the UAE next. The relationship between Pakistan and Saudi Arabia goes back over fifty years and is historic in nature. It is no surprise that Munir selected Saudi Arabia as his first stop given the close defense ties between the two countries. Given the growing economic troubles in Pakistan, it would not be outside the realm of possibility for Munir to request additional Saudi economic relief at the behest of his civilian leaders. Or at least pave the way for an official request to come at some point in the near future.
The government is hoping its energy plan succeeds in buying the time needed for Pakistan to rebuild its foreign reserves. Saudi Arabia and the IMF provide Islamabad with the best short-term opportunities for relief. If neither suitor can be successfully courted, Pakistan will find itself facing the very real prospect of a Sri Lanka-like economic collapse at some point in the coming months.