Caretaker govt pledges to use foreign reserves to reduce trade deficit

Published June 12, 2018
Caretaker Finance Minister Shamshad Akhtar addressing a press conference. —DawnNewsTV
Caretaker Finance Minister Shamshad Akhtar addressing a press conference. —DawnNewsTV

Fears mounted over Pakistan's economic stability before elections this summer as the caretaker government pledged on Tuesday to stem the current account deficit by using rapidly dwindling foreign currency reserves.

There is growing speculation that the government will have to seek a loan package from the International Monetary Fund following the elections, for the second time since 2013, amid fears of a balance of payments crisis.

“We have to finance this gap of the trade deficit of $25 billion by depleting our reserves. There is no other option,” caretaker Finance Minister Shamshad Akhtar told a press conference. “This is a major worry which our government is facing.”

The announcement came hours after State Bank of Pakistan devalued the rupee by 3.7 per cent, the third devaluation since December.

A caretaker government was installed last week as the country prepares to head to the polls on July 25, in what would be only the second democratic transfer of power in its 70-year history.

Pakistan relies heavily on imports and has struggled for decades to increase exports, with chronic power shortages and creaky infrastructure hampering growth.

It is also saddled with a heavy public debt — 70 per cent of GDP, according to Akhtar — along with a yawning fiscal deficit.

The economy grew by 5.8 per cent during 2017-18, missing a government target by two per cent, according to documents from the finance ministry.

Plagued for years by a Taliban insurgency, it has been battling to get its shaky economy back on track and end the energy crisis crippling industry.

Confidence has grown slightly in recent years, with security improving and the IMF claiming in October that Pakistan has emerged from crisis after completing the bailout programme.

The growth in GDP comes amid structural reforms, an improved energy sector and China's ambitious multi-billion dollar infrastructure project — the China-Pakistan Economic Corridor — linking its western province of Xinjiang to the Arabian Sea via Pakistan.

However, fears remain about Pakistan's ability to repay the Chinese loans, with much of their terms shrouded in secrecy.

Opinion

Editorial

Kurram atrocity
Updated 22 Nov, 2024

Kurram atrocity

It would be a monumental mistake for the state to continue ignoring the violence in Kurram.
Persistent grip
22 Nov, 2024

Persistent grip

PAKISTAN has now registered 50 polio cases this year. We all saw it coming and yet there was nothing we could do to...
Green transport
22 Nov, 2024

Green transport

THE government has taken a commendable step by announcing a New Energy Vehicle policy aiming to ensure that by 2030,...
Military option
Updated 21 Nov, 2024

Military option

While restoring peace is essential, addressing Balochistan’s socioeconomic deprivation is equally important.
HIV/AIDS disaster
21 Nov, 2024

HIV/AIDS disaster

A TORTUROUS sense of déjà vu is attached to the latest health fiasco at Multan’s Nishtar Hospital. The largest...
Dubious pardon
21 Nov, 2024

Dubious pardon

IT is disturbing how a crime as grave as custodial death has culminated in an out-of-court ‘settlement’. The...