Pakistan economic crisis: Forex reserves below $10 billion, fuel prices hiked again

Despite a new government taking over in Islamabad, there is no end to Pakistan's economic woes.

Bloomberg reported on Thursday that the foreign exchange reserves of the State Bank of Pakistan had "decreased by $366 million in the week ended May 27 to stand at $9.72 billion".

This marks a drop of nearly 50 per cent from last August and is "enough to pay for less than two months of imports", sources reported.

The publication warned the foreign exchange situation could spill over "into a fullblown economic crisis unless policy makers secure a loan from the International Monetary Fund".

In recent weeks, Pakistan has been making efforts to meet the IMF's conditions for securing a loan of $3 billion. This includes raising fuel and electricity prices.

On Thursday, Pakistan Finance Minister Miftah Ismail declared the prices of fuel products such as petrol, diesel and light diesel had been raised by Pakistani Rs 30. 

This is the second such increase in weeks. The latest increase takes the price of petrol to Pakistani Rs 209.86 and diesel to Pakistani Rs 204.15.

One Indian rupee is equal to 2.54 Pakistani rupees at current rates. Ismail also announced power prices would be hiked by Rs 8 per unit from July 1.

Ismail acknowledged the price hikes would worsen inflation, but defended his actions, blaming the previous Imran Khan government. "

Global rating agency Moody's Investor Service on Thursday downgraded Pakistan's outlook from stable to negative, citing "heightened external vulnerability" and uncertainty around securing external financing to meet the country's needs. 

Moody's said that while it was hopeful Pakistan would complete its IMF review and attract further external financing, if Pakistan failed to do so, then it could face a balance of payments crisis.

Sources report warned the trade deficit was another worry for Islamabad.