Earlier this week, Pakistan’s Finance Minister, Ishaq Dar, announced that he would appeal to overseas Pakistanis for assistance in combating the country’s foreign exchange shortage. As part of a video conference on Islamic finance, Dar praised philanthropist Bashir Farooqi’s initiative to raise $2 billion from philanthropists for five years. The initiative is not expected to generate profits for Farooqi.
In order to alleviate the shortage of foreign exchange that is causing delays in the clearance of imported goods from the port authorities, a fundraising campaign is being launched. As part of this initiative, Citizens Foundation, Akhuwat Foundation, and Indus Hospital are also participating.
Dar recommends eliminating interest-based banking and establishing Islamic banking instead. In just a few years, a bank with only 100 branches grew to 1,000 after adopting Islamic banking practices. The government is confident that it will be able to meet the conversion criteria within the stipulated timeframe if stakeholders cooperate.
However, the country’s foreign exchange reserves have fallen to a nine-year low of $3.7 billion, not enough to cover even three weeks of imports. In response to a directive from the State Bank of Pakistan, banks have been instructed not to open letters of credit for a majority of imports, which has resulted in a significant slowdown in import-dependent industrial activities. Due to this, thousands of containers, including essential items, have been stranded at ports, potentially resulting in shortages in the future.
The government is currently in discussions with the International Monetary Fund for a bailout of $1.2 billion and for inflows from friendly countries in order to alleviate the situation.
The fundraising initiative led by Farooqi with the support of Dar and other philanthropic organizations represents a significant effort to combat Pakistan’s foreign exchange shortage.