Pakistan’s foreign exchange reserves fall short by $16bn, says Dr Hafiz Pasha

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Dr Hafiz Pasha, renowned economist, expressed concerns over Pakistan’s economic challenges during the book launch event of “Leading Issues in the Economy of Pakistan,” hosted by Germany’s Friedrich Ebert Stiftung (FES). Dr. Niels Hegewisch, FES Country Director in Pakistan, and Dr Aisha Ghaus Pasha, State Minister for Finance and Revenue, also attended the ceremony.

In his presentation, Dr Hafiz Pasha highlighted the country’s major obstacles, with multilateral debt being the primary concern. Pakistan’s foreign exchange reserves fall significantly short of the required amount, and without substantial deposits from friendly nations, this problem cannot be resolved.

Dr Pasha’s study emphasized that loan repayments pose the biggest challenge for Pakistan, with most loans obtained from the same sources. Meeting the International Monetary Fund’s (IMF) conditions is the second major hurdle, especially regarding tax amnesty, which the IMF strongly objects to.

Additionally, Dr. Pasha shed light on the reasons behind the looming economic crisis, attributing it to flawed economic policies that are pushing the country towards default. He expressed concern that development projects worth Rs. 9 trillion remain unfinished even after decades, and it is unlikely they will be completed within the next 18 years.

The economist also highlighted the escalating issues of inflation and unemployment in Pakistan. He warned of a potential food inflation rate of 53%, primarily caused by the relentless increase in the value of the dollar. The recent floods have further exacerbated the situation, resulting in an additional 10 to 11 percent rise in unemployment, totaling around 2.5 million unemployed individuals.

Dr. Pasha emphasized that approximately 2.5 million people are living below the poverty line, requiring the government to allocate 2.4 trillion rupees to address this issue. To combat inflation, salaries and pensions will need to be increased by Rs. 600 billion next year.

Furthermore, Dr. Pasha called for a revision of trade agreements, pointing out that Pakistan’s trade balance with China is heavily skewed in China’s favor, accounting for 90% of the total trade.

State Minister Dr. Aisha Ghaus Pasha acknowledged the resistance to reforms within the existing power structure. She emphasized the need to increase Pakistan’s economic growth rate, urging the country to take appropriate measures. Dr. Aisha Ghaus Pasha concluded by stating that welfare measures must accompany macroeconomic policies to enhance Pakistan’s economy.

The event witnessed the presence of senior political leaders, economists, members of civil society, and media representatives.