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Business & Finance

IMF agreement, falling oil prices a ‘blessing in disguise’ for Pakistan, says expert

There are prospects that oil may fall to $30 per barrel and inflation decline to six percent, just like in the prev
28 Feb 2020
  • There are prospects that oil may fall to $30 per barrel and inflation decline to six percent, just like in the previous government, says expert.
  • The decline in oil prices could save billions of dollars to the national exchequer.

Falling oil prices amid spike in coronavirus cases, alongside government's agreement with the International Monetary Fund (IMF) for $450 million is a ‘blessing in disguise’ for Pakistan.

These were the views expressed by Mohammad Sohail, Chief Executive Officer (CEO) of Topline Securities, while talking to a private channel. “The IMF agreement alongside the fall in oil prices is a blessing in disguise for the country, there are prospects that oil may fall to $30 per barrel and inflation decline to six percent, just like in the previous government,” he said.

The IMF on Thursday reached a staff-level agreement on the second review of Pakistan's economic program under the Extended Fund Facility. The completion of the review will enable disbursement of around $450 million for Pakistan.

Whereas, the prices of oil that makes up a major share of Pakistan imports tumbled to their lowest since January 2019, as further novel coronavirus cases outside China fanned fears that a pandemic could slow the global economy and erode demand for crude.

Brent crude contract for May was down 90 cents, or 1.7pc, at $50.83 a barrel on Friday, a 14-month low. The international benchmark, which fell about 2pc on Thursday, has shed around 12pc this week and is on track for its steepest weekly decline since mid-January 2016.

Sohail pointed out that lack of demand in international markets and global recession is a ‘negative’ indicator for Pakistan exports. “However, Pakistan has a very limited export base, and is a net importer so a global slowdown will benefit Pakistan.”

The economics analyst further said that the decline in oil prices could save billions of dollars to the national exchequer.

The Topline Securities chief said that he expects Month on Month (MoM) inflation to fall in the month of February. “If the government reduces oil prices by Rs5-10, it I highly probable that inflation would decline in the month of March as well,” he added.