Ayesha Saba

Instead of depending on IMF’s bailouts, Pakistan needs to find long-term and permanent solutions to fix its economic issues, particularly the current account deficit. It will have to increase its tax-to-GDP ratio to generate the much-needed revenue to be used for people’s welfare. This was underscored by Dr Ashfaque Hassan, Dean of Business School, National University of Sciences & Technology, Islamabad, while talking to WealthPK. He stated that Pakistan also needs to focus on modernisation and upgrading its manufacturing sector to increase exports for inclusive and durable economic growth and to bridge the current account deficit.

“As an alternative to IMF for a balance of payments support, Pakistan should develop a concrete policy to curb imports, promote exports and remittances, float bonds in the international market, attract foreign direct investment, and introduce wide-ranging structural reforms,” he emphasised. Sajid Amin, Deputy Executive Director and founding head of the Policy Solutions Lab at Sustainable Development Policy Institute (SDPI), told WealthPK that Pakistan’s economic crisis, including its high inflation, low growth, and declining foreign exchange reserves, requires a comprehensive reform agenda that addressed both short-term stabilisation and long-term structural issues.

He said that the IMF had the capacity and the flexibility to help member countries in a variety of ways. He, however, said the prolonged delay at the IMF staff-level agreement to unlock the much-needed funds had multiple negative consequences for Pakistan. He said the delay in finalisation of the ninth review of the ongoing IMF loan programme had caused dwindling of the foreign exchange reserves of Pakistan, plunging them to critical levels, hardly enough to finance controlled imports of four weeks.

“Delay in the IMF programme has affected investor confidence, increased inflation, and hindered growth prospects. Pakistan must act quickly to secure the bailout loan and mitigate the socioeconomic effects,” he stressed. He quoted a recent World Bank report, which said that the ongoing economic crisis had a negative bearing on many human development indicators like poverty reduction, education, health uplift, gender equality and environmental sustainability. Sajid Amin emphasised that policymakers needed to take bold and timely decisions in response to Pakistan’s worsening economic situation.

Pakistan’s total foreign exchange reserves, including those held by commercial banks, have witnessed a decline, reaching $9.99 billion in the week ending May 5, 2023, according to the latest data released by the State Bank of Pakistan. The country’s foreign exchange reserves have experienced a significant decrease of $17.238 billion since reaching a record high of $27.228 billion on August 27, 2021. This decline emphasises the importance of implementing long-term solutions to address Pakistan’s balance of payment crisis.

Credit: Independent News Pakistan-WealthPk