In recent days rumours have been doing the rounds that the country is going to default. The rumour mill hit the scene after Pakistan Tehreek-i-Insaf (PTI) leaders gave back-to-back statements that the country was on the verge of bankruptcy, and later on, a delay in the IMF review date also caused market nervousness. Though Finance Minster Ishaq Dar has dispelled the impression of default, he should explain the delay in the next programme review and the resulting release of funds, to dispel Pakistan’s perceived default risk. Moreover, Pakistan’s five-year credit swap jumped from 56.5 per cent to above 75 per cent. Pakistan is due to pay $1 billion against the maturity of Sukuk on December 5, whereas the shrinking foreign exchange reserves make it an uphill task. Minister Dar tried to shrug off the looming threat, calling it an overblown concern, as noted earlier by the State Bank governor, but markets remain on edge due to falling foreign exchange reserves, which fell below $8 billion last week. Finance Minister Ishaq Dar told the nation on Saturday that Pakistan will not default, will make its forthcoming $1 billion bond payment, and there will be no gasoline scarcity in the country. Ishaq Dar’s assurance of no default should be welcomed but at the same time, the minister should address the country’s deteriorating economic position, which the government is incapable of handling. Businesses have been in serious crisis as there is a liquidity bottleneck that cannot be addressed through bank loans due to high interest rates. The widening current account deficit is another issue that is fueling speculation and spreading further economic uncertainty.
In such difficult times, political leaders must refrain from speculating about increased risk, as such statements would harm the country and should be avoided. The current account deficit, according to Mr Dar, was $316 million in September and is forecast to be around $400 million in October. If this goes on, it would be around $5-6 billion for the year. Implementing rational macroeconomic policies and changes is critical not only for regaining the faith of our foreign creditors but also for creating fiscal space to assist millions of disaster victims and reconstruct destroyed facilities.
It is time for us to learn to stand on our own two feet, but unfortunately, we are still unwilling to learn our lesson and continue to rely on handouts.