ISLAMABAD: Pakistan’s economy faces serious challenges due to fast decreasing foreign exchange reserves and political instability. Talking to Business Recorder former Finance Minister Dr Hafeez Pasha stated that both domestic and international factors are contributing to the ongoing economic impasse.
Foreign exchange reserves are decreasing by $300-400 million on weekly basis due to an increase in imports and may drop below $8 billion in the next couple of months, which would be very alarming if the current trend of imports continued Pasha added.
He said that oil prices are hovering between $104-105 per barrel in the global market and no one can definitively predict which direction prices would move next. In such a situation, he said, the International Monetary Fund (IMF) programme would be the only hope for the country as the programme and not the money disbursed under the programme is important for Pakistan.
Pasha suggested the need to drastically reduce imports, increase revenue collection and sustain the 26 per cent growth achieved in exports during the last month.
However, he expressed concerns about the increase in trade deficit during the last month due to the higher price of oil and commodities in the international market. This would result in more inflation in the coming months not only because of high commodity and oil prices but also because of the impact of the depreciation of the rupee against the dollar as well as an increase in electricity and gas prices, he added.
Former Finance Minister stated that according to his estimate, inflation would increase to 25-30 percent in the next two to three months and the poor would be facing the brunt of inflation, as well as, in terms of fewer employment opportunities due to a projected slowdown in economic activity. He added that 15 percent increase in the discount rate and cost of electricity/ gas would have a negative impact on the output.
Pasha said there has been an increase of 56 percent in prices during the last four years whereas the earnings of low-income group are estimated to increase barely by 20 to 22 percent.
He said, unfortunately, the government strategy in the budget remains focused on increasing tax rates instead of taking measures to expand the tax base. Pasha said that the current situation requires political stability in the country to steer the economy out of the current morass. He said that political instability has also been contributing to the economic situation and no one is ready to invest in the country.
He said that the current economic situation requires all the stakeholders to sit together and take decisions to save the economy.
However, former Adviser Finance Ministry Dr. Ashfaque Hassan Khan said that the economy is sinking and nobody is interested in salvaging it. He said that the state of the economy is not in good shape with a rupee free-fall taking the country’s economy towards greater vulnerability.
Copyright Business Recorder, 2022