Almost all economic analysts had stressed the need for another International Monetary Fund (IMF) programme in order to maintain the foreign reserves and make debt repayments. And now, the IMF has spoken too. It released a report on Pakistan’s macroeconomic outlook in which the lender highlighted the need for Pakistan to go for another programme and seek support from other multilateral lenders. The IMF was of the view that Islamabad had to resolve its long-term balance of payments (BOP) pressures, and for that it required continued adjustment and creditor support beyond the current programme period.
The IMF isnt wrong here. Islamabad’s economic challenges were complex and risks were still hovering over it. Therefore several corrective measures were needed to be taken to put the economy on the right track. The standby agreement was direly required to avert the danger of default. The nine-month $3billion programme served as a stopgap arrangement, but this is not enough. After the staff level agreement with the IMF for the $3 billion loan, the country’s economic indicators saw a positive shift, with the stock market rising to record level and the dollar gaining considerable appreciation.
But within days, things were back to square one. The bullish trend in the stock market has somewhat lost steam, though time and again it sees a positive jump, but on the dollar-rupee front, the greenback is coming back, with a vengeance. Everyone had expected that higher dollar inflows would ease pressure on the rupee. However, the trend was short lived. The dollar has appreciated by a significant margin, which was against the expectations of both the government and currency experts.
At the moment, the foreign reserves stand at $8.7 billion due to inflows from the IMF, Saudi Arabia and UAE. But how long can Pakistan keep on relying on loans? It needs to shift its economy from loan-based to export-based. We need to reactivate our dormant sectors to generate revenue. Our textile industry is facing a decline, which can be assessed from the data released by the Pakistan Bureau of Statistics.
Exports of textiles and clothing had contracted by 14.63 per cent to $16.5 billion during the outgoing fiscal year 23 as a result of high production costs, liquidity constraints and lower global demand. Similarly, net foreign direct investment (FDI) fell by 25 per cent to $1.46 billion in the previous fiscal year, as per the State Bank of Pakistan’s report. Therefore, we need a policy that revives failing sectors and brings in investment to earn revenue and kickstart our economy.
Recently, Prime Minister Shehbaz Sharif had announced a policy in which a number of attractive incentives were offered to foreign investors. We need to follow up on it, use our embassies to spread the word and organise business summits in the country and abroad to attract investors.
On the other hand, we need to support our business community to increase exports. We need to tap on products that had previously not been our focus. We have the best quality granite and marble; our kitchen ware has immense potential and so does our carpet industry.
Let’s give them a push, they will roll on themselves.