MANILA: Asian Development Bank’s (ADB) former country director Werner Liepach said Pakistan will not need a bailout package as its economy was doing well, adding that there was no need to panic even as the current account deficit widens and foreign exchange reserves continue to fall.
Addressing a media briefing at the 51st Annual Meeting of the ADB Board of Governors in Manila, Liepach said remittances continue to remain strong and would help meet external sector challenges.
“Things are pretty much okay,” said Liepach. Overseas workers’ remittances touched a seven-month high at $1.77 billion in March 2018, which came on back of the second round of rupee devaluation, he added.
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In its latest quarterly report, the State Bank of Pakistan also anticipated that the country would attract a maximum of $20.5 billion in remittances in fiscal year 2018.
Liepach, who is the director general ADB for Central and West Asia Regional Department, also maintained a positive outlook of Pakistan’s growth. He acknowledged that the budget deficit has gone up a little but it is “quite normal in election year”.
Currently, the country’s budget deficit is projected to stand at 5.5% of GDP at the end of fiscal year 2018, while SBP-held foreign exchange reserves currently amount to $11.51 billion.
Additionally, Pakistan’s current account deficit has continued to expand and the nine-month gap has increased to $12.03 billion. However, the ADB official remained optimistic.
“What’s happened is that imports have gone up quite a lot due to increased economic activity related to the China-Pakistan Economic Corridor (CPEC), which is not a bad thing.
“What is missing is that export growth hasn’t really gone as expected.”
He highlighted various factors that impact the growth of exports, including the overvalued exchange rate, which has been taken care of. “The latest information that I received is that exports are starting to pick up again,” he informed.
Now, due to the early rise in imports followed by late pick-up of exports, there has to be a reaction in the foreign exchange reserves, which is of concern, but Pakistan has a way of financing its reserves and “there is no need to panic”.
He added that ADB and the World Bank are not the only ones in town as Pakistan has managed to secure a loan from China. “The country is also contemplating tapping the capital markets, because the market has been responsive lately.”
Stressing on ADB’s role, Liepach said the agency always gave policy-based loans to finance structural reforms, which in no way is a bailout.
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This is the same approach that the Manila-based lending agency has adopted to transform the energy sector in the country.
The ADB wanted Pakistan to implement the Advanced Metering Infrastructure (AMI) project, which would mitigate load shedding. But the Ministry of Power and the Planning Commission were reluctant to go forward with the project. Despite efforts by ADB and the support of former finance minister Ishaq Dar, the $400-million project was put on hold. The project is still awaiting government’s approval.
“The government has not yet taken a final decision. There have been concerns about the technology and the cost. It’s a new technology so people sometimes may not appreciate the changes,” Liepach remarked.
Published in The Express Tribune, May 4th, 2018.
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