IMF A bitter pill for economy or a loss of political face What Naya Pakistan will choose?
PSX hits nine-month low after Shehbaz Sharif's arrest and drop by 860 points
(WebDesk/DunyaNews) - Pakistan has seen a great set back in terms of economy, business and investment due to political instability and uncertainty in recent times. An already dilapidated economic impose a grave threat with enlarging financial crisis which get worsened more in the first fifty days of Pakistan’s new government.
Pakistan Tehreek-e-Insaf got a mandate on the slogan of ‘change’ however a vague and ambiguous atmosphere of uncertainty has shrouded markets, business, finance and investment in Pakistan which surely is not a welcoming change.
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The most critical among all the difficulties and troubles is the fast-dropping foreign reserves. Foreign exchange reserves of State Bank of Pakistan (SBP) dropped by $627 million to $8.049 billion.
Also Read: Country s foreign exchange reserves fall US$627m
Out of remaining $8.049 billion, Pakistan government has left with only around $2 billion as more than $6 billion belongs to those who have their foreign currency accounts in Pakistani Banks. A rapid fall of the value of rupees is also critical and crucial. It is pertinent to consider that Pakistan is continuously running short of the resources to improve its foreign reserves and balance of payments.
On the other hand, Pakistan government yet has not decided to take or not take IMF’s bailout package which in turn is affecting business, investment and financial activities within Pakistan.
Recent tension over the political landscape looms another threat to the economy of Pakistan. After the dramatic and unexpected arrest of leader of opposition and president of Pakistan Muslim League-N,Pakistan stock exchange have fallen by 860 points and closed at 39, 226 points. More than 1700 points are descended in a week only which is a decrease of 4.1 pc of market. Due to such downfall of business and investment in market, investors have lost Rs. 336 billion in a week only. Within the 50 days span of present Pakistan Tehreek-e-Insaf government, stock exchange went down by 10 percent which costs a loss of more than Rs. 750 billion.
Also Read: Pakistan Stock Exchange records free fall during outgoing week
Economists and senior bankers have urged the government to take immediate action and make an announcement on already-delayed strategy to deal with the depleting foreign exchange reserves.
While talking to the senior anchorperson and journalist Kamran Khan, the CEO of Topline securities and a business analyst Sohail Khan in Dunya News’ Program Dunya Kamran Khan Kay Sath told that a lack of clarity of government’s economic plan stirs uncertainty in the circles of business and investment which in turn sparks doubts and reservations over their plan of action to boost economy and take the businessmen out of financial crisis.
Government despite giving benefit of doubt cannot take much time to divulge their financial and economical policies with regards to the IMF bailout package, privatization, increase in taxation or anything else.
Muhammad Sohail further said that international investor is more worried about the recovery of his already invested dollar as State Bank due to insufficient foreign reserves playing a delay tactic in releasing payments. An investor is afraid of losing his money as government of Pakistan delays written on the wall, A-Must- IMF bailout package, and still is killing time and dilapidating the economy more in seeking other not-sufficient ways to safe his political face only.
The Imran Khan led PTI government misjudged the support of friend countries and expected Saudi Arabia and China would give Pakistan such hefty financial support. Pakistan besides having a relief of $10 to $12 billion on immediate basis also is in a dire need of a strict discipline which can only be maintained by IMF.
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He said that the latest devaluation of rupee against dollar is also an outcome of Pakistan plead to Saudi Arabia for investment. At present, Pakistan needs dollar more than investment.
He has a view that Pakistan has to take the bitter pill of IMF as it is still enjoying its honeymoon period and people can somehow manage to bowdown against the hikes in prices and a decrease in subsidies. A strict discipline for eight to ten months can bear fruitful results to the economy of Pakistan.
Talks with the International Monetary Fund had been going on to discuss terms for a possible bailout. The Fund has suggested to Islamabad to raise interest rates more, end subsidies, devaluation of rupee by at least 15% more in the current fiscal year and increase in power and gas tariffs.
Also Read: IMF calls for more action in Pakistan
The delay by the government in announcing its policy direction to deal with the worsening external crisis of depleting economy has perturbed the financial sector more which is sternly criticising to the government’s inaction to tackle the situation.
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