ISLAMABAD: Amid worsening economic conditions, caretaker Prime Minister Justice (retd) Nasirul Mulk has decided to take a briefing on the economy, indicating economic affairs as his top priorities.
The Ministry of Finance, the Economic Affairs Division and the Federal Board of Revenue have been asked to give a holistic briefing on the country’s current economic situation and near-term challenges on Monday, according to official sources.
In addition to seeking a briefing on the economy, Mulk also directed the government’s legal team to approach the Supreme Court of Pakistan against the Lahore High Court (LHC) verdict declaring nomination papers for the coming general election null and void.
Like its predecessors, the PML-N government has also left the economy in a mess and the country is again facing the challenges of a yawning budget deficit and uncontrolled current account deficit.
The current account deficit – the gap between external receipts and payments – widened to a record $14 billion during July-April period of this fiscal year, according to the State Bank of Pakistan.
The budget deficit during the first nine months (July-March) also widened to a new record of Rs1.481 trillion, which is equal to 4.3% of Gross Domestic Product.
These three divisions are expected to present a realistic picture of the economy since their political masters have left the stage.
“If immediate corrective measures were not taken, the economic bubble may burst within the next fiscal year,” said an official of the finance ministry on the condition of anonymity.
He said that the finance ministry would present two to three options to the caretaker prime minister on handling the external sector of the economy.
There were internal discussions whether the finance ministry should advise the caretaker prime minister to review the possibility of initiating a dialogue with the International Monetary Fund for a new bailout programme, said the sources.
The discussion for the last bailout package of $6.2 billion had begun during the caretaker set-up and the programme was signed by the PML-N government in September 2013.
The country’s gross official foreign exchange reserves have slid to mere $10 billion by May 18, which are enough to provide cover only for two months import bill.
The steep decline in official foreign currency reserves has provided an opportunity to speculators to manipulate the rupee-dollar parity.
In order to tackle the situation, the Exchange Companies Association of Pakistan called an urgent meeting on Saturday and decided that the association would discourage speculative behaviour.
“The State Bank of Pakistan is no more in a position to defend the current rupee-dollar parity as it does not have the luxury to pump $200 million weekly in the interbank market,” said the sources in the central bank.
Against the interbank exchange rate of Rs115.7 to a dollar, the rate in the open market has shot up to Rs119.
The sources said that the finance ministry would also brief the interim prime minister about the challenges posed by the Financial Action Task Force’s (FATF) decision to place Pakistan on a grey list of countries that financially support terrorism.
Pakistan is required to present its Action Plan to Asia Pacific Group next week before submitting it for the FATF Plenary, scheduled to meet in the third week of June in Paris.
The Economic Affairs Division is expected to give a briefing on the country’s deteriorating debt situation. About $2.4 billion external debt payments will be maturing in May-June period, said the sources.
“For FY2018-19, about $8 billion external debt payments are due,” said the sources.
The PML-N government obtained gross foreign loans of over $44.2 billion in its five years tenure, which has now pushed the country into a debt trap.
There was an increase of 48% in the country’s total external debt and liabilities in the past five years due to the last government’s inability to attract sufficient non-debt creating inflows to meet Pakistan’s external account requirements.
The country’s total external debt and liabilities that stood at $61 billion in June 2013 have now shot up to $92 billion by end April.
The caretaker prime minister has also called the FBR for a briefing on the country’s revenue position. The FBR has so far managed to collect Rs3.274 trillion in revenues from July to May period of fiscal year, registering 14.4% growth in collection.
However, the tax machinery was supposed to attain 19.2% growth rate to achieve the annual collection target of Rs4.013 trillion.
The PML-N government lowered the target to Rs3.935 trillion that again seems an uphill task.