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EDITORIAL: It turns out that repeated assurances from the State Bank of Pakistan (SBP) and finance ministry were on the mark, after all, not mere attempts to talk up the market as many were suspecting.

And a 47 percent month-on-month reduction in the import bill for July, IMF’s (International Monetary Fund’s) statement that all prior conditions for the 7th and 8th reviews of the EFF (Extended Fund Facility) have been met, and (not to forget) SBP’s crackdown on speculators have finally combined to breathe fresh life into the equity and currency markets; with KSE rising more than a thousand points in two days and the rupee recovering at least 5.75 percent of its extraordinary losses over the last few weeks.

SBP has also gone a step ahead and initiated strict monitoring of the entire forex sector, which should take care of any excess volatility going forward. The drop in imports has reduced importer-demand for dollars, of course, and exporters who were holding back proceeds because of the devaluation are also releasing them.

The IMF did add another last-minute condition to its final, board-level approval in late August and the actual release of the money, though, by insisting that Pakistan first shore up its reserves by securing extra funds from other bilaterals (read friendly countries).

But all such concerns have also been laid to rest by the government’s announcement that it has secured pledges for about $4 billion in just such loans. So things ought to improve in the near future, at least, especially when the bailout funds arrive in the State Bank’s vaults and do national reserves a world of good, besides restoring investor confidence to a much greater degree.

Yet a lot of this good work, which has no doubt demanded great sacrifices from the people and the government, will be quickly undone if the political temperature does not improve, so we are nowhere near out of the woods yet.

No doubt politics had a very big role to play in the economic paralysis of the recent past and unless the air of uncertainty created by aggressive, confrontational politics diminishes very soon, any improvement will be very short lived.

For, appreciated as the shrinking trade deficit is, it will not be sustainable if it only banks on cutting imports indefinitely; and sooner or later we will have to incorporate higher export earnings, higher FDI (foreign direct investment) and higher remittances. And none of that will be possible if the leading politicians of the country are at each other’s throats all the time.

Finance Minister Miftah Ismail and SBP acting governor Dr Murtaza Syed were also right that neither the stock market nor the rupee was trading at its real value partly because of the country’s political environment. And that’s one thing that neither tax cuts nor interest rate hikes can fix.

It must, and eventually will have to, be handled by the political elite itself. The days when they’d use the people to meet their own self and party interests, as all of them are doing right now, need to be put behind us forever. Otherwise, serious investors will never park their money here and we would be the poorer for it.

Even with the bailout programme in the bag, though, we’ve not scored some sort of breakthrough, only managed to stay afloat a little bit longer. But since this will make securing other loans much easier, and cheaper, the government will now be overcome with the rush to collect many more billions for just this fiscal’s debt repayment requirements. And that, even with IMF’s wind on our back, is no easy task.

It will be no surprise, therefore, if in this frenzy of borrowing the government once again fails to give due attention to overhauling the manufacturing and export sectors which must, at the end of the day, spearhead revenue generation to relieve the current account.

Copyright Business Recorder, 2022

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ASIF KHAN Aug 11, 2022 05:12pm
This is good news that the government has succeeded in restricting the imports. Unless we control the import of unnecessary and irrelevant goods, our currency will keep falling. And the fall in value of rupee will reduce the value of our exports even if theirs quantity increases. In short, devaluation of currency has never given the text book results, especially in developing countries.
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MKA Aug 12, 2022 10:28am
The steps taken to take the economy out of this financial muddle should be enforced and persevered. Present Punjab Government should stop taking steps to undo the steps taken. I men shop closing times etc. PML Q does not represent a iota of Province's vote bank. Imbeciles
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asma Aug 12, 2022 12:04pm
Plz resume mera pakistan mera gher poor people have no option to purchase home now days so I request u again plz resume
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Hussain Naqvi Aug 12, 2022 06:10pm
AslamoAlikum: Excellent Editorial. Hope our sincere politicians will show their patriotism. I think we should learn from Chinese's how to develop the nation. We are no dout a great nation, only problem is lack of leadership. Regards
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