Pakistan's economy grinding to a halt as dollars dry up

As Pakistan struggles with a dire foreign exchange crisis, thousands of containers filled with basic food supplies, raw materials, and medical equipment have been held up at the Karachi port.

Banks are refusing to grant fresh letters of credit for importers due to a shortage of critical dollars, which is hurting an economy already under pressure from high inflation and weak growth.

Abdul Majeed, a representative of the All Pakistan Customs Agents Association, claimed that in his 40 years in the industry, he has never seen a worse time.

He was speaking from a location close to the port of Karachi, where shipping containers full of chemicals, pharmaceuticals, diagnostic tools, and lentils for Pakistan's manufacturing industry are sitting idle while payment assurances are obtained.

The lack of money has left thousands of containers detained at the port, according to Maqbool Ahmed Malik, chairman of the customs organization, who also noted that business was down at least 50%.

With payments totaling more than $8 billion due just in the first quarter, state bank foreign exchange reserves last week fell to less than $6 billion, the lowest level in nearly nine years.

Analysts estimate that the reserves would cover imports for around a month. With the rupee falling and inflation at decades-high levels, Pakistan's economy has collapsed amid a brewing political crisis. Devastating floods and a severe energy deficit have added to the pressure.

The South Asian nation's enormous national debt — currently $274 billion, or nearly 90% of gross domestic product — and the endless effort to service it makes Pakistan particularly vulnerable to economic shocks.