Another IMF loan could be considered



Pakistan is heading towards acquiring a new lending program from the International Monetary Fund (IMF) after the completion of existing $ 6 billion bailouts, as economic loopholes, built over the past 75 years, continue to grow. ‘to exist.

The national economy is facing three major challenges: low export earnings, falling savings rates and soaring world commodity prices.

“Another IMF program is inevitable once the current program ends,” said Ehsan Malik, CEO of the Pakistan Business Council (PBC). “Maybe the new government will have to do it.”

State Bank of Pakistan (SBP) Governor Reza Baqir highlighted the three current challenges as well as three positive developments in the national economy during the world’s largest historical Covid-19 crisis after WWII.

They were speaking on the occasion of the fifth anniversary of “The Future Summit – What’s Coming Next? Hosted by Nutshell and Martin Dow on Wednesday.

While criticizing some of the IMF’s tough conditions for resuming the current program, including increasing energy tariffs and taxing already taxed companies, Malik hoped that the global lender’s next program would be “better designed and structured. “.

“You cannot hope to get rid of your fundamental flaws which have accumulated for 75 years in three years [IMF current programme from July 2019 to September 2022]. It is simply not possible. So this (next) program needs to be better structured. “

Previously, the PTI government in place in the Center had repeatedly stated that the current program would be the last.

Previous governments, including those of the PML-N and the PPP, had made similar statements.

SBP Governor Baqir said the three challenges that have prompted the country to repeatedly return to the IMF in the past were a higher debt-to-GDP ratio, an unsustainable current account (or balance of payments) deficit and a decline in the country’s net foreign exchange reserves.

The proactive measures by the government of Prime Minister Imran Khan and the central bank to deal with the challenges of the Covid-19 pandemic have, however, improved the three economic fundamentals.

Pakistan’s debt-to-GDP ratio has declined by 2.4% over the past two years, while the ratio has increased by an average of 18% in developed countries and 10% in emerging market economies during the pandemic. “, added Baqir.

Pakistan’s foreign exchange reserves have continued to increase over the past two and a half years despite the pandemic.

Read Finance Division asks IMF to postpone review to end of January

“Our foreign exchange reserves were equivalent to our forward commitments [around $7 billion each] in 2019. As a result, our net reserve buffers were at zero in 2019, ”he said.

“Despite the existence of the Covid, we have increased our net reserves buffers [SBP foreign reserves at around $10 billion minus forward liabilities at less than $3 billion in February 2020]. “

Proactive measures such as policy rate adjustment and a flexible market-based exchange rate have helped control the current account deficit in 2020 and 2021 and have supported the achievement of a (rapid) V-shaped recovery in economic activities last year.

At present, the same adjustment of the policy rate and flexible exchange rate has helped moderate the overheating of the economy following the surge in world commodity prices and the recovery of aggregate demand in the world. national economy, said the SBP governor.

In addition, the SBP has injected more than 2 trillion rupees [5% of GDP] in the economy by different monetary measures.

Pakistan’s exports have started to increase since last year.

“Exports would still remain weak if they increased to 8-10% of GDP compared to [peer] savings, ”Baqir added.

“There is a great need to increase the savings rate.

“Low savings rates agreed upon by governments are turning to international lenders in the past. “

Speaking at the event, Governor of Sindh Imran Ismail said that eradicating corruption from society is no easy task.

“There are still institutions where the work is not done without bribes. We set the Federal Council of Taxes (FBR) and Customs,” he added.

He argued that textile manufacturers and exporters had recorded high profits in the past three years which they had not been able to achieve in the previous 10 years.

Read more The IMF will change its head of mission

Pakistan Stock Exchange Chairman Shamshad Akhtar said climate change was getting worse. It is wreaking havoc on human health and the global economy.

“Pakistan is fifth on the list of the most vulnerable countries in the climate scenario,” she said, adding that it was necessary to introduce amendments to the rules and regulations to protect themselves from the worsening of the climate.

Air Chief Marshal (ret’d) Sohail Aman said leadership remains the most important element in all aspects of life, including navigating difficult times into a certain future.

“The advancements in technology are amazing [today], but it is leadership that creates the enabling environment, ”he added.

Faith, innovation, passions and empowering others through leadership remain the four major steps “to navigate into the future”.

Engro Corporation chairman and CEO Ghias Khan said Covid-19 had magnified economic challenges, such as making the current account deficit unsustainable.

“There is a great need to increase exports and create import substitution to make the current account deficit sustainable. A hybrid work environment, that is to say… it’s a new standard.

Habib Bank Limited (HBL) Chairman and CEO Muhammad Aurangzeb said innovation did not just mean deploying technology, but it was “thinking outside the box.”

He added that digital banking and customer experience will drive the banking industry to stay in business while moving forward.

Faysal Bank Chairman and CEO Yousaf Hussain said Islamic banking has become the choice of customers.

“This [shariah-compliant banking] helps accelerate financial inclusion in Pakistan. “


Comments are closed.