- Pakistan’s net forex reserves now in the red?
The International Monetary Fund has spoken and an oracle is not needed to decipher what it predicts and what the future holds for the country’s economy, being based on stark, not fudged, facts and figures. In its first Post-Programme Monitoring Report since the end of the $6.64 billion External Fund Facility (EFF) to Pakistan in September 2016, the IMF paints a bleak picture of the overall economy, with special emphasis on foreign exchange reserves, current account deficit and the country’s capacity to meet its foreign debt obligations. All indicators point to the government’s utter failure in carrying out structural reforms and meeting other conditions set by IMF before releasing tranches under the EFF, and hollowness of its policy measures. Though the government has contested some IMF statistics, the reality is not rosy or glowing as repeatedly claimed by the now fugitive finance minister, and the report is a late or last warning about economic vulnerabilities that need emergency redress, and (probably wasted) advice on other corrective measures.
The IMF had long stressed rationalising two pillars of the economy, reducing fiscal deficit and building up foreign exchange reserves, which latter is actually the main objective of its loans. But, according to it, on February 14, Pakistan’s net international reserves were actually minus $724 million, as forex liabilities stood at $13.5 billion against gross official reserves of $12.8 billion, with foreign debt expected to swell to $103.4 billion by June 2019. The current account deficit is reckoned to widen to $15.7 billion, or 4.8percent of GDP, this year, while GDP growth rate for 2018-19 has been revised downwards to three percent, making foreign inflows next fiscal year needing $27 billion in essence. The next couple of years are crucial, they threaten testing economic times for the economy and ordinary citizens, and government should immediately restrict the unfettered and unlimited flight of foreign currencies from Pakistan, and facilitate the country’s exports in earnest. But, ultimately, it all boils down to former Singapore President Lee Kuan Yew’s statement, ‘either I can be rich or my country can be rich’. That is the clear choice.
