- As expenditures pile up
Prime Minister Imran Khan, through his Instagram account, announced that Qatar’s emir will be visiting Pakistan this week bringing with him $22 billion, notably $1 billion higher than what Saudi Arabia’s rown Prince Muhammad bin Salman brought to the table during his visit a few months ago. Both these ‘major’ investments are merely MOUs at this stage meaning that these aren’t dollars being deposited into Pakistan’s coffers rather it is a distraction from what the external account situation really is and how worse it is going to become.
The PTI government’s reliance on foreign loans has doubled the external debt figure in less than a year. Pakistan’s external debt, which includes deposits made in the central bank by foreign donors among other variables has skyrocketed from Rs 740.8 billion in June 2018 to Rs 1,414 Billion in March. This includes various grants (not to be confused with investment) from Saudi Arabia, China and UAE. What is worrisome is that despite such massive support from ‘friendly foreign lenders’ the net reserves with the SBP have been continuously falling since March, when they peaked at $10.49 Billion, and are now standing now at a six-year low of $ 7.8 billion–- this figure was at its lowest in 2012-13 at only $6.0 billion. Simply put, we are burning through our dollar grants faster than they are coming in. With the SBP swap figure now at $8 billion the central bank is essentially bankrupt. The IMF deal still remains in limbo dependent upon meeting tough pre-disbursement conditions and a positive FATF review outcome.
Pinning hopes on miracles like hitting oil or waiting for long-term investment ‘understandings’ to materialize is not the way to address these very serious issues. Despite a welcome reduction in the import bill, a majority of these funds are spent on buying oil and debt servicing. On the domestic front the situation is not much different. Perhaps PM’s Finance Adviser Hafeez Sheikh understands this better than the PM and his ministers. In a meeting the economic czar went off on some cabinet members for dragging their feet on the privatization of Pakistan Steel Mills (PSM) that has a Rs 400 million monthly salary bill with zero output. The Prime Minister the other day said the economy has stabilized. Is everyone on the same page looking at the same set of problems?