Although slumping economic figures from both official and unofficial sources indicate that the slump has not yet subsided. But the coalition government insists there is no cause for panic. And the necessary steps are at hand, which will turn around soon. better economy
Even with official certification But skeptics have consistently pointed out that they see no plans aimed at catching an economic recession and expressing deep reservations about how the country’s economy will be managed.
In this context, any mention of the so-called economic magic of the incumbent finance minister has proved hollow. And he failed miserably to stem the tide of misery affecting the country’s economy.
Finance ministers have expressed a somewhat uncertain feeling in dealing with the current economic complexity. And he appears to be conducting negotiations with foreign donors with great discontent. This could prove detrimental to future relationships with them. Another concern expressed about finance ministers is that He is burdened by many responsibilities beyond his job in managing the country’s finances. which causes a great lack of interest for the country’s economic affairs
The decline in the economy is mainly due to the steady decline in foreign exchange reserves. which is now less than $6 billion. It ranks as the lowest reserve since April 2014 over the past year. Foreign exchange reserves decreased by $11.6 billion. As in December 2021, it was $17.7 billion.
The current level of foreign exchange reserves is barely enough to cover a month of imports. The net international reserves held by commercial banks are now $5.9 billion. This means that the country’s total foreign exchange reserves are now $12 billion.
However, it may be seen that these large reserves are lent by friendly countries and may not be used to distribute import invoices. And this deterrence greatly upset the country’s trade and trade circles. which further deteriorates economic confidence
It is widely reported that, despite official assurances, But friendly countries will no longer lend money due to their reservations about the ongoing lack of Pakistan economic managers to eliminate the structural flaws found in Pakistan’s economy. And they are unwilling to add money to Pakistani funds. As they think such exercise is a bounty that is wasted.
Of immediate concern is the massive delay in the latest release of funds to Pakistan by the IMF. And economists see the reason for this reluctance to be the fact that the coalition government is lagging behind in the basic performance criteria set by the IMF.
The ninth review of the project is undergoing long-distance negotiations between IMF officials and Coalition finance managers to release $1.18 billion. The relatively long delay in the conclusion of the required review has triggered claims emanating from various economic observers. In particular, Pakistan’s former finance minister said the country still faces the risk of default.
This impression has persisted despite numerous denials by the authorities, although such denials have lost their credibility. Many observers are also concerned. Because the incumbent government has not provided a credible explanation of the delay in final negotiations with the IMF.
It also suggests that the top executives of the country’s economic hierarchy choose to remain relatively modest in relation to rapidly depleting foreign exchange reserves. And it clearly didn’t plan straightforwardly to deal with important issues related to imports.
Comments: Shabbar Zaidi Spelling Doom
It is noted that with reserves reduced to very low levels. There are fears that Pakistan may not meet its external obligations in fiscal year 2023. So it’s quite interesting to see the Governor of the State Bank of Pakistan. It shows confidence in Pakistan’s ability to repay the $23 billion due this fiscal year. But the key point missing is the repayment of that debt.
The country’s highly unsustainable financial condition led the ratings agency S&P Global to downgrade Pakistan’s long-term credit rating by one notch to “CCC+” from “B”, to reflect the continued depreciation of the country. external gauge fiscal and national economy
The agency said the country’s low foreign exchange reserves will remain under pressure until 2023 unless oil prices fall or foreign aid improves. The agency also said that Pakistan also faces heightened political risks that could affect the trajectory of policy in the coming year. Soaring food and energy inflation as well as rising global interest rates. It is expected to pressure Pakistan’s economic and fiscal results with medium-term refinancing challenges.
One issue that is coming first is the massive outflow of dollars from Pakistan to Afghanistan. since the United States Suspend the country’s war-torn reserves after last year’s Taliban occupation. It was also noted that before the Americans withdrew from Afghanistan, The country has a glut of dollars due to the influx of Americans into the country for two decades, resulting in dollars being freely exported out of the country to Pakistan.
The reversal of the process puts a lot of pressure on Pakistan’s economy. Due to the illegal outflow of dollars into Afghanistan. along with other highly controversial factors such as the trade deficit and the current account. and a decrease in multilateral and bilateral inflows. has eroded Pakistan’s foreign exchange reserves.
In this context, it is mentioned that, in addition to US sanctions, against the Taliban regime. Kabul has ordered its citizens to convert large amounts of Pakistani rupees into dollars or other foreign currencies. It has increased the flow of dollars to Afghanistan in recent months. Afghans are reportedly no longer allowed to keep more than half a million worth of Pakistani currency. And any person found in violation of this order will be subject to trial under anti-money laundering laws.
Pakistan’s fiscal system has failed to curb the outflow of foreign dollars despite limiting the annual personal foreign exchange to $6,000 for travelers. The most worrisome is None of the administrative measures taken over the past year to stop the smuggling of dollars across the western border of the country have had the desired effect. except occasional arrests for attempting to extract hard currency in large quantities.
The illegal outflow of dollars is one of the many factors that have put the Pakistani exchange rate under immense pressure in recent months. and contributes to the market discrepancy As a result, exchange rates in the interbank market and the open market are different. It is critically important to keep illegal dollars flowing out of the country into Afghanistan and should ensure that controls at Pak-Afghan land borders are tightened along with similar steps. same for port of pakistan
Without such strict measures It will be extremely difficult to reverse the situation and bring stability to the deteriorating economy. The continued outflow of foreign exchange rates could further deteriorate the economy.
