Economic policy over next several months crucial for Pakistan: US Ambassador

KARACHI: US Ambassador to Pakistan Donald Blome has said economic policy developed over the next several months would be crucial, remarks that come as a new government prepares to take charge of affairs in Islamabad.

“It will take a concerted effort to ensure it (the economy) moves in the right direction,” Ambassador Blome told a select group of journalists at the US Consulate General in Karachi recently.

“Pakistan has made good progress confronting serious challenges in the past six months. But it remains vulnerable to shocks. Continued progress on key reforms can help Pakistan’s economy become more resilient.”

Pakistan’s economy has been navigating a perilous path, flirting with default fears and raising concerns on its debt profile with many onlookers stressing the desperate need for structural reforms.

A last-minute $3-billion bailout with the International Monetary Fund (IMF) not only helped avert a balance-of-payments crisis, but also took the economy on the path to a reforms’ agenda that saw it raise energy tariffs, and make attempts at privatising loss-making state-owned entities.

Still, average inflation for the first eight months of the ongoing fiscal year stood valiantly at 28%, and overall Large Scale Manufacturing (LSM) sector has shown negative growth of 0.39% during the first half (July-December) of 2023-24.

With the IMF bailout scheduled to end soon, analysts believe another programme is certain – a longer, tougher and bigger facility that takes Pakistan closer to a level of self-reliance.

Blome was sworn in as the US Ambassador to Pakistan on April 11, 2022, merely a day after Pakistan saw yet another change at the Prime Minister’s Office. Barely two years into his post, he will see the return of Shehbaz Sharif as Pakistan’s 24th PM.

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Ambassador Blome said the path for the new government is clear.

“One of the first things, in all likelihood, the new government will have to address will be finding a way ahead with a new IMF programme. We certainly encourage it to work with the IMF on reforms that make sense for Pakistan, and help it break the cycle of indebtedness and required international financing that constrains other kinds of things for any country that’s involved with it,” he added.

When asked if the new setup – formed after unlikely partnerships were forged – could undertake reforms, Ambassador Blome said the incoming government has the ability to do it.

“We want Pakistan to succeed.

“If this is done (economic reforms), it will build certainty and confidence among investors, and enable economic growth, fueled by sustainable, inclusive FDI from the US and other partners. We are confident Pakistan can do this, and break free from an over-reliance on unsustainable debt.”

Like a lot of international investors, US firms are wary of volatility or inconsistency in policy. But it hasn’t meant that there has been a large exodus of existing investors. I’ve seen that in a lot of cases, plans for further investment have been deferred, rather than cancelled: US Ambassador to Pakistan Donald Blome

Business ties with the US – long seen as a major ally and important trading partner – have struggled to make the headlines in the face of political instability in Pakistan, but Blome said Washington wants to see more US investment flow into the country.

“The US sees huge potential in increasing two-way trade and investment between the two countries.

“Like a lot of international investors, US firms are wary of volatility or inconsistency in policy – wherever they are looking – this is one of the factors in Pakistan that is a concern.

“But it hasn’t meant that there has been a large exodus of existing investors. I’ve seen that in a lot of cases, plans for further investment have been deferred, rather than cancelled. There is some watchfulness of government policy, but with strong signals that Pakistan is moving forward on the reform agenda, a lot of these concerns will be assuaged. I expect that international investors will see that positively.”

Ambassador Blome also said this is a dynamic moment in global investment and trading patterns, and Pakistan has the potential to take advantage.

“During these last two years, a pattern of strong capital shifts and investment flows has been seen, moving from place to place in response to supply-chain disruptions.

“It has been a dynamic period. Some Asian economies have done really well in this time. Pakistan has lagged a little bit in attracting that, but I strongly believe Pakistan should be in that conversation. It has enormous potential to take advantage of a dynamic moment in global investment and trading patterns. This is one of the things any government should be looking at prioritising.”

Ambassador Blome said Pakistan will be competing with dozens of other locations, and needs an “aggressive approach to attracting FDI like others have”.

Copyright Business Recorder, 2024