Learn what Pakistan can learn from Sri Lanka to avoid financial crisis

Pakistan Economic Crisis: Pakistan is on the verge of destruction. The country is facing shortage of foreign exchange. Inflation reached a high of 31.5 per cent in the month of February and the chances of default have increased. The situation in Pakistan coincides with the situation faced by Sri Lanka a year ago, which gives some indication of the way forward for Pakistan.

According to a foreign media report, Reza Baqir, former governor of the State Bank of Pakistan, said that Pakistan has not always been successful in taking ownership of its economic policies. There is also a long history behind this. The decline in terms of trade in Pakistan, mainly due to rising energy prices as well as liberal state finance policies, has led to tensions.

IMF bailout package a challenge
The last devastating flood in Pakistan has also given a tremendous blow to the country’s economy. Given the instability of Pakistan, meeting its huge debt obligations will be a difficult task. Pakistan also faces the challenge of clearing the $1.1 billion bailout package from the International Monetary Fund (IMF) this year. Pakistan has reportedly received a loan of $2 billion from Chinese banks. But to avoid default, perhaps more funding will be needed.

IMF agreed to give loan
Talking about the economic condition of Sri Lanka, the IMF has agreed to give loan. For this, the IMF will give $2.9 billion to Sri Lanka in installments over four years. The reason behind this is the stability of Sri Lanka’s foreign exchange reserves and currency. Sri Lanka’s inflation has also come down sharply. In September last year, the inflation rate was 70 percent, while at present it has become 50 percent.

Sri Lanka followed strict rules to get loan from IMF, the amount received as loan from other countries was also presented as guarantee to IMF. Sri Lanka assured to strictly follow every rule of IMF. Pakistan will also have to adopt similar policies, so that its situation can improve. Pakistan also needs to control foreign exchange reserves like Sri Lanka. Sri Lanka’s central bank tightened its policies, which helped to correct the imbalance.

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