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The Pakistani government is facing several financial challenges as it has been unable to pay salaries to its diplomatic staff stationed at critical and select missions for the past three months due to a severe dollar liquidity crunch or crunch according to a report by a reputed media agency.
Poor State of Pakistani Economy
As reported by another prominent media agency, press attaches working in diplomatic missions in the United States of America and Hong Kong as well as press counsellors posted in Singapore have not compensated since June 2023. The report further states that the Pakistan Finance Ministry has indicated that salaries cannot be disbursed even for the month of September, citing the exhaustion of the country’s foreign exchange reserves.
This crisis is very disturbing and particularly concerning for Pakistani Officials stationed in cities where the cost of living is high, such as Washington DC and Hong Kong as they now may have to face another month without salaries.
The top government sources quoted in a news agency confirmed the prolonged salary delay stating that “The Press attaches working in Washington DC and Hong Kong as well as the press councillor deputed in Singapore continue to live without salary from June.”
This is not the first time that Pakistan has faced such challenges in paying for its diplomatic staff. In the previous fiscal year (2022-23), the government confronted such an issue, which was ultimately addressed with the approval of salaries through the supplementary grant by the Finance Ministry Ishaq Dar for the employees in the Economic Coordination Committee (EEC) of the Cabinet
The Pakistani economy has been struggling for several years, leading to considerable hardships for its population due to soaring inflation rates. The crisis has been further exacerbated by depleting foreign exchange reserves and skyrocketing energy prices.
Despite receiving approval for a long-awaited $3 billion bailout from the International Monetary Fund (IMF) aimed at helping Pakistan avoid defaults on its debt repayments, Islamabad is grappling with the challenges of meeting the conditions imposed by the lender further complicating the nation’s financial outlook
Why is Pakistan’s Economy Crumbling?
There are a multitude of factors that are responsible for the potential collapse of Pakistan’s economy, the very first cause is due to the rising inflation. The inflation in the country is at its apex as thousands of containers of food items, raw materials and equipment are stuck in ports after the cash-strapped government curtailed importance.
Higher Inflation tends to have a depressive effect on the value of the country’s currency. This is because increased inflation reduces the country’s buying power, which weakens it against other currencies.
The second reason for the economic crisis is attributed to foreign exchange reserves which are currently at their lowest level enough to pay only a few weeks of imports. Pakistan is also highly import-dependent particularly related to energy. It is vulnerable to the hike in oil and gas prices.
The third reason for Pakistan’s economic collapse is attributed to weak governance and political stability. These are significant factors as they weaken investors’ confidence in the country and contribute to the corruption and pork barrel politics that undermine the fiscal position of the nation.
The fourth and most important reason behind the fall of Pakistan is the impact of flash floods on its economy. In 2022, a devastating flood hit the nation from June to October. It has resulted in large-scale damage to the crops and farms. The government became increasingly dependent on imported goods and oil. The flood has affected nearly 33 million people and has led to damages worth over 30 billion. The country’s exports have slumped to an enormous extent.
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