Pakistan to face balance of payment crisis in 2016, says AKD

According to business tycoon Aqeel Karim Dhedhi,  Pakistan will face a balance of payment (BoP) crisis in 2016.

In 2016, when foreign exchange inflows from the International Monetary Fund (IMF) stop, the external sector of the economy is likely to come under pressure, Dhedi told a local news media.

Dhedhi is the chairman of the AKD Group, a business enterprises in Pakistan founded by his late father Haji Abdul Karim Dhedhi.

The BoP reflects all economic transactions of a country with the rest of the world. A BoP crisis can put the national currency under pressure as soon as a country appears to be defaulting on interest payments due to fiscal constraints. In simple words, money leaves the economy during a BoP crisis and the government finds it difficult to borrow further, thus wrecking the value of the national currency.

“I foresee a BoP crisis because exports are declining and foreign direct investment (FDI) is nowhere to be seen. We should forget about achieving a current account surplus this year,” Dhedhi said.

According to the latest export figures released by the State Bank of Pakistan (SBP), Pakistan’s exports shrank by $538 million, or 9%, on an annual basis during the first quarter of the current fiscal year. Although the year-on-year rise in the FDI for Jul-Sept was $15.6 million, or 7.7%, the increase seems unimpressive in view of the GSP-Plus status that Pakistani exports enjoy in the European market.