The lingering political chaos and deepening economic crisis in Pakistan have reached a point where everyone with stakes here has been pondering over options to break out of the quagmire defined by falling reserves, energy shortages, hiking inflation and a shrinking economy.

Moin Fudda is the chairman of the board of directors of the Central Depository Company and the former managing director of the Pakistan Stock Exchange. In a recent conversation, he suggested launching a real estate dollar investment scheme for non-resident Pakistanis (NRP) to ease the mounting pressure on dangerously low forex reserves and insufficient resources to support flood affectees.

According to the State Bank data released last Friday, the net foreign exchange reserves of the SBP depleted to $5.58 billion on 30th December 2022, down by $245 million from a week earlier. The net reserves with banks clock at $5.85bn, which adds to total liquid reserves at $11.43bn. The SBP net reserves over the course of the tumultuous 2022 shrunk to about one-third by the close of the year to what it was at the start. In January 2022, SBP reserves were $16.6bn.

The average monthly import bill of Pakistan is over $6bn. The current reserves are scarcely sufficient to fund imports for barely 28 days.

An idea for a real estate dollar investment scheme for non-resident Pakistanis seems unviable given the trust deficit

Besides the actual precarious situation (falling exports, remittances and delay in disbursement of funds by bilateral and multilateral donors while the country desperately needs the hard currency to fund necessary imports, meet private demand, service debt and rehabilitate people/infrastructure destroyed in floods) the perception of inching towards default has played the market.

The growing gap between the interbank and open market rates (interbank exchange rate is in the vicinity of Rs225 against Rs235 and above to a dollar in the open market) has been aggravating the problem as overseas remitters switch to informal channels for money transfers.

“The government should open the real estate sector in Karachi, Lahore and Islamabad for overseas Pakistanis to strengthen dollar inflows, support reserves and fund schemes to rehabilitate flood-affected masses in Sindh and Balochistan”, Mr Fudda floated an idea.

“If it is for flood relief and if the military establishment assumes the responsibility of fund management, I suppose it will inspire confidence in overseas investors and gain currency. To address the trust deficit of NRPs, the involvement of Defense Housing Authorities in the three major cities would help,” he added.

In the energy sector, in his opinion, instead of promoting solar generation based on imported panels and equipment, the government must encourage local production of solar panels through joint ventures with advanced technologies in alternative energy. He quoted examples of Turkey and Bangladesh in this regard.

Many bigwigs in the corporate sector and experts on the economy did not bother to respond when approached for their input on Moin Fudda’s ideas. Business leaders are still pinning their hopes on donors as they thought the opportunity cost of a failed Pakistan might be too high regionally and globally to test.

“It’s not just China and Iran. Even India and Afghanistan wouldn’t wish the nuclear-armed nation to fall apart. The dangerous outfalls of such an eventuality are too obvious to be ignored by the West. It’s just a matter of time. The help will arrive and probably sooner than most people expect, hopefully.

“I am not against trying options, but honestly, I think it’s too late for the government to be able to tame the hydra-headed monster that the crisis has become without the help of bilateral friends and multilateral donors,” commented a big corporate gun.

Some experts were sceptical, particularly over involving the army in the affairs of the civil government, which they thought was beyond the mandate of martial forces inscribed in the Constitution. They mentioned rising cases of terrorism in the country and cross-border hostilities that the forces must focus on to ensure security within and without.

Dr Vaqar Ahmed, associated with Sustainable Development Policy Institute, and adviser to multiple economic entities and forums, did not discard Mr Fudda’s suggestion and saw merit in exploring the idea seriously. “If fears of a recession in advanced economies realise faster than anticipated, NRPs would respond strongly in favour of such a scheme”, he noted.

Dr Ali Cheema, a renowned researcher associated with multiple institutes, expressed interest. “I don’t have a prediction for this, but I would love to learn what happens in case the government decides to act on the idea,” he remarked.

Economist Ahmed Qadir was not quite convinced also of the trust deficit in Pakistani authorities. “I would be very concerned about sharing confidential personal information. And what legal recourse would I have should I make such an investment in Pakistan? People still wonder what happened to the money they donated in 1997 for the ‘debt retirement scheme’ under former prime minister Nawaz Sharif’s government.

“The lack of transparency and the past record of successive governments fails to inspire confidence. We constantly eye hard-earned investable funds of NRPs without offering any safety and surety of returns on investment,” he said.

Talking about political leanings towards PTI in the Pakistani community abroad, he thought their trust in the party was breached when it assumed power in 2018 and got a chance to make corrections in its nearly four-year rule before being forced out of the government.

“Grand claims of ending corruption in 90 days, reforming the police system, improving the performance of bureaucracy, and providing employment and housing did not materialise even remotely. It shook the confidence of overseas supporters generally. It would serve political parties, perhaps better, if they, instead of over-committing to voters and supporters, under-promise and over-deliver,” he shared his opinion.

Dr Nadeem Javed, former chief economist Planning Commission of Pakistan, who currently teaches at multiple universities, did not find the suggestion viable. “It won’t help if the exchange rate difference between interbank and open market rates will remain wide.”

The writer can be reached at asubohi@hotmail.com

Published in Dawn, The Business and Finance Weekly, January 9th, 2023