NOTWITHSTANDING the reassuring observations of State Bank Governor Dr Shamshad Akhtar about the state of the country's banking sector and her firm hope that it would be able to overcome the liquidity crunch that, she believed, had been caused by withdrawals on Eid, the over-all economic situation by any count seems to be worsening by the hour. The continuing and rapid fall in of the rupee in relation to the US dollar, the dwindling foreign exchange reserves, that now stand at $8.1 billion, and the apprehensions about sugar crisis in the offing clearly point in that direction. The rupee-dollar parity registered a precipitous drop of Rs 1.80 in just two days, raising fears that it would soon cross the psychological barrier of Rs 80 to a dollar, the figure it touched at one point in the open market on Tuesday, though it closed at Rs 79.60. This persistent depreciation is inevitably having an adverse impact on the prices of imports and the cost of the production of goods within the country, providing another rationale for inflation to keep spiralling higher. Reports about the growing gap between production (expected to be 3.5 million tonnes this year) and consumption (4.2 million tonnes) of sugar and the millers' attempt to reduce supply to the market and their tendency to withhold payment to the growers - all adds up to a scary scenario for the general public that the authorities would do well to take note of and adopt remedial measures. Although the government is sending a delegation to the US to argue for an assistance of $10 billion to prop up the economy and avoid default about which Standard & Poor's lowered rating indicated the other day, the economic crisis that has engulfed the entire world might prove a formidable hindrance to securing that amount. One hopes that the Friends of Pakistan, due to meet in Dubai later this month, would come up with a package sizeable enough, if not the $100 billion President Zardari has asked for, to enable the country to get over the crisis.