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May 20, 2022

South Asian nations Pak, Lanka, Nepal face foreign currency reserve crisis

Foreign Affairs News Desk
Pakistan PM is social media
Pakistan PM is social media

As Pakistan is also facing foreign currency crisis, the Pak Prime Minister Shehbaz Sharif government announced an ‘emergency economic plan’ on Thursday which would be effective immediately.

Under the plan Pakistan has banned the import of 38non-essential items to save the country’s foreign exchange reserves.

“My decision to ban (the) import of luxury items will save the country precious foreign exchange,” Sharif tweeted.

Informing about the new economic order at a press conference, the Information Minister Marriyum Aurangzeb said, “We will be able to save US $6 billion by imposing a ban on import of the luxury items.” According to the report, till last week, Pakistan’s foreign currency reserve dropped to US $10.16 billion.

Meanwhile, the Indian Ocean island nation Sri Lanka is also on the brink of bankruptcy.

Till yesterday, May 19, 2022 was the deadline to repay the loans but the Sri Lankan government has declared that it cannot repay loans on set timeline.

Lanka has suspended repayment of about US $7 billion in foreign loans due this year out of US $25 billion to be repaid by 2026.

The country’s total foreign debt is US $51 billion. Lankan economic woes have brought on a political crisis, with the government facing widespread protests as the government fails to solve the country’s economic crisis.

Protesters hold Rajapaksa and his family, who have dominated nearly every aspect of life in Sri Lanka for most of the last 20years, responsible for the crisis.

According to the Central Bank Governor Nandalal Weerasinghe, Lankan individuals can possess US $10,000 from US $15,000. If found to possess more than possessing they will be penalized, the central bank announced adding people must place their excess foreign currency in a bank or convert it into local currency within two weeks. Then after, found anyone violating the new rules will be fined, said the Governor. The cash-strapped South Asian nation of 21.8 million, Lanka is a lower-middle-income country with a GDP per capita of USD 3,852(2019).

According to the World Food Programme, 22% of Sri Lankans are undernourished or malnourished and faced severe floods and droughts that threaten food security and limit access to clean water.

According to the new PM of Sri Lanka Ranil Wickremesinghe, the country has only a stock of gasoline for about a month. The government asked state employees not to go to work on Friday, except for those needed to maintain essential services, because of the fuel shortages. Also, the country is facing an electricity power shortage with long hours of load shedding.

As report, the country needs US $75 billion to help provide essential items, but the country’s treasury is struggling to find even US $1 billion.

Earlier, in Nepal too, the Government of Nepal has banned imports of non-essential goods, including cars, cosmetics, and gold and other luxury items for the time being citing a liquidity crunch and declining foreign exchange reserves Nepalese market acutely felt the scarcity of the US dollar should be taken up seriously.

According to central bank- Nepal Rastra Bank, Nepal has seen a decline in forex reserves due to the surging imports, declining inflows of remittance and meagre earnings from tourism and exports adding that the country’s forex reserves had decreased by 17 per cent to US $9.75 billion.

The forex reserves are now only enough to sustain the import of goods and services for 6/7 months.

Thus, the Nepal government has urged Nepalese nationals living abroad to open dollar accounts in banks in the country and make investments amidst the economic crisis in the Himalayan nation