ISLAMABAD:- The external financing’s needs of Pakistan will likely to reach at unprecedented level to $35 billion, if the commodity prices don’t start falling, said in the report of Dr Hafeez Pasha, renowned economist.
The external debt servicing is likely to be $ 12 billion during the current fiscal year. Therefore, the annual financing requirement of Pakistan will reach the unprecedented level of almost $ 30 billion in 2021-22. If commodity prices do not start falling, then the inflow of funds required in 2022-23 will rise to $ 35 billion, said the economist.
The political situation had led to a de facto suspension of the Pakistan EFF program by the IMF. The rupee is floundering and has fallen below Rs 188 to the dollar. For the first time international credit rating agencies like Bloomberg are highlighting the growing risk of default that Pakistan faces in its external payment obligations, he said.
Pakistan is close to a financial crisis once again due to the rise in international commodity prices after June 2021, following recovery of the world economy and more recently after the start of the Russia-Ukraine war, and the exponential in external debt repayments.
The coalition government in power will have to implement very strong fiscal, monetary, and other policies to restore the ability of Pakistan to fully meet these large external debt repayment obligations and sustain the level of essential imports.
Hafeez Pasha further said that the PTI government had inherited the largest ever current account deficit of over $19 billion in its first year in office. Reserves plummeted to $ 9 billion by December 2018. The economic situation forced the PTI government to take decision to go to IMF for which it was trying to avoid. Following commencement of the IMF program the policy rate of the SBP was raised from 7 to 13.25 percent.
The precipitous fall in commodity prices after COVID-19 greatly helped in curtailing the current account deficit which fell sharply to $ 4.4 billion in 2019-20 and to only $ 1.9 billion in 2020-21. Reserves increased to the healthy level of $ 18.7 billion by June 2021, he said.
The commodity prices started rising sharply from April 2021 onwards. They have since gone up by over 60 percent. Consequently, the current account deficit has risen once again to the very high level of $ 12 billion in the first eight months of 2021-22, he stated.
In human development index of the UNDP, Pakistan has had a relatively low ranking, even among South Asian countries. Pakistan was ranked 125th among 180 countries in 2008. It is ranked 154th in the latest ranking.
According to the report, the external debt to GDP ratio declined somewhat during the tenure of the PPP government and has risen thereafter, as per the SBP. The very critical ratio of external debt as percentage of exports has risen to an extremely high level, from 192 percent in 2007-08, with a doubling, to 388 percent in 2020-21. Fortunately, although low, reserves as percentage of external debt have shown a rising tendency since 2012-13.
The years 2008-09 to 2020-21, the average GDP growth rate has been relatively low while the rate of inflation has been relatively high. Very high levels of power loadshedding and acts of terrorism played a major role in restricting private investment and constraining productive activity up to 2015-16. The pandemic, COVID-19, then wreaked substantial damage on lives and livelihoods after March 2020.
Each of the three governments has made efforts to sustain the economy in difficult conditions.
The policy of PML-N regime to keep the inflation rate very low especially prior to the elections led a 30 percent jump in imports from 2015-16 to 2017-18, said in the report.

By adminmy

Leave a Reply

Your email address will not be published.