The rupee has stabilised, but it has not come down significantly against the US dollar, as expected by the government. The current account deficit is also projected to remain under control but Pakistan’s foreign reserves, remittances and exports are falling, which will ultimately affect its current account balance.

Pakistan’s problems have been compounded by floods, which weakened its already fragile economy, while inflation has also reached historic peaks after power bills have almost quadrupled in the last few months. The winter has started and the use of electricity has declined but power bills still remain the biggest issue of the common people.

Another point of concern for the policymakers is that foreign exchange reserves of the country are decreasing despite the revival of the IMF programme and curbs on imports. Foreign exchange reserves of the State Bank of Pakistan (SBP) decreased by $956 million to $7.95 billion due to external debt servicing during the week ending on Nov 4. Major external debt repayments executed during the week include the repayment of the government’s commercial loans. Refinancing of these loans is in process, which will improve foreign exchange reserves in the coming weeks, the central bank said. The total liquid foreign reserves held by the country stood at $13.72b. Net foreign reserves held by commercial banks amounted to $5.76b.

Foreign Direct Investment (FDI) into Pakistan has plunged by 47pc during the first quarter (July – September), according to data released by the State Bank of Pakistan. It said that the FDI fell to $253 million during the first quarter of the current fiscal year as compared with $479 million in the corresponding quarter of the last fiscal year. The inflows recorded a 31.7pc decline to $395 million during the quarter under review as compared with $579 million in the same quarter of the last year. On the other hand, the outflow under the FDI significantly increased by 42.5pc to $142 million during July–September 2022/2023, as compared with $99.6 million in the same period of the last fiscal year. The total foreign private investment into the country fell by 36.3pc to $241.3 million during the quarter under review when compared with $379 million in the corresponding quarter of the last fiscal year. The portfolio investment in the capital market registered a massive decline in outflow. The outflow of portfolio investment recorded $12.1 million during the first quarter of the current fiscal year as compared with the outflow of $100.5 million in the same quarter of the last year.

Overseas Pakistanis sent home $2.2 billion in October, down by 9.1pc from the preceding month. Data released by the State Bank of Pakistan showed the year-on-year decline in remittances clocked in at 15.7pc. The cumulative inflow of $9.9b in the first four months of 2022-23 reflects a drop of 8.6pc on a year-on-year basis. Inflows from all major sources registered a year-on-year drop in July-October. Remittances from the United States in the four-month period decreased by 8.6pc, Saudi Arabia 11.7pc and the United Arab Emirates 9.2pc.

On the other hand, the country’s exports shrank by 3.77pc in October to $2.37 billion from $2.64b in the corresponding month last year. On a month-on-month basis, export proceeds decreased by 3.07pc. However, the total export proceeds stood at $9.54b in July-October against $9.46b in the corresponding period last year, indicating a meagre rise of 0.94pc. The growth shows that it will be difficult to achieve the export target in the current fiscal year.

The import bill in the first four months (July and October) stood at $21.01b against $25.08b last year, indicating a decline of 16.21pc. As a result of the decline in imports, the trade deficit in October fell by 42pc to $2.26b this year from $3.90b over the corresponding month last year. In the first four months, the trade deficit dipped by 26.59pc to $11.46b from $15.62b over the corresponding months of last year.

The current account deficit is expected to remain well below $10 billion in the current fiscal year. The projected deficit of $10 billion (less than 2.3pc of gross domestic product – GDP) is nearly half of the latest forecast of 4.3pc deficit by the World Bank. According to SBP Governor Jameel Ahmad, the country would annually save $500 million due to fresh restrictions on the use of credit and debit cards.

According to the Fitch Ratings, recent widespread floods in Pakistan have further weakened the country’s economy, already in turmoil with a rising current account deficit, inflation above 20pc and a sharp depreciation of the rupee currency. The agency said the floods would undermine Pakistan’s efforts to rein in twin fiscal and current account deficits.

The government claims to have saved the country from a default but it has failed to save the common people from unprecedented price hikes in the process. The inflationary trend, which has been rising relentlessly for four months, slightly abated in the week ending on November 10 as the year-on-year (YoY) inflation fell from 30.6pc to 29.24pc. However, according to data provided by the Pakistan Bureau of Statistics (PBS), week-on-week inflation showed a slight increase, recording at 0.74pc compared to 0.53pc last week and a record 4.13pc in the week that ended on Oct 27. During the week, the prices of 22 out of 51 items increased, 14 decreased, and 15 remained stable.

It is clear that the country faces serious challenges on external and external fronts and it needs political stability to deal with them.