Pakistan needs $20 billion dollars to avoid the foreign payment crisis in 2019. Pakistan will not only seek IMF bailout plan but will also approach friendly countries to get loan, aid or financial help to raise the required amount. This is a massive amount of money but Pakistan needs to raise it.
This is not an easy task for the newly formed PTI government and its finance minister. Finance minister Asad Umar is giving the impression that he is not in a hurry to seek IMF help to overcome the financial woes. But the government is negotiating an IMF program behind the scenes. Recently, IMF team made a visit to Pakistan to discuss the economic situation with finance ministry.
Pakistan will have to work on different plans to arrange this huge amount of money in a period of just few months. Naveed Kamal, a senior economist and head of CITI Bank Middle East shared his views on this situation. “No one party appears to be willing to provide the entire amount ($18-20 billion) required to run the country in the current fiscal year 2019.
Foreign currency reserves of Pakistan have dropped to a critical level of $9.04 billion that provides import cover for only around one and a half month. And “The trade deficit of $30-35 billion is unsustainable.”
The PTI government is avoiding going back to the IMF. The main reason is that IMF will impose tough conditions for the fresh loans. The government will be forced to increase the prices of electricity, energy, petrol and gas. There will be lot of strings attached with IMF program. But it seems unavoidable in the current circumstances.
Pakistan can overcome this problem of trade deficit and financial gaps with the increase in revenues. It is vital for Pakistani economy to widen the tax net to increase the domestic revenues to end its dependence on external resources.
Pakistan needs to increase exports and foreign direct investments to avoid balance of payments crisis and bailouts in the future. Pakistan cannot sustain the present level of trade deficit and current account deficit. Pakistan needs to invest money in export oriented industries and in infrastructure to increase production and revenues.
Pakistan should concentrate on Chinese investment in different sectors of economy and especially in infrastructure projects. China had so far invested around $20 billion in Pakistan’s Early Harvest infrastructure and power projects under CPEC. Chinese investment can help to develop infrastructure and economy.
Pakistan needs modernization in both industry and agriculture to boost production and income. Pakistan desperately needs to increase the agriculture production to overcome the crisis in the agriculture sector.
Pakistan needs to reform the economy to solve the financial and economic problems permanently. Pakistan should take loans but only for productive purposes. Pakistan can attract direct foreign investment with the improvement in the law and order situation and infrastructure.
The serious reforms will not only solve the problems of increasing debts and deficits but also triggered the high economic growth rate.
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25 August, 2019