Pakistan is slowly and gradually heading towards Sri Lanka-like crisis situation due to the worsening domestic political and economic situation, which can be turned around through political dialogue and prudent economic policies.
“We are at a distance of 30-35 days from Sri Lanka’s (crisis-like situation),” Exchange Companies Association of Pakistan (ECAP) General Secretary Zafar Paracha said while speaking at a conference titled “Strong Rupee – Strong Pakistan”, organised by the Forex Association of Pakistan (FAP) on Saturday.
“Economic emergency should be imposed in Pakistan,” he said, adding all the stakeholders should be on one page and their one-point agenda should be restoration of “economic stability in the country”.
Several other speakers also compared Pakistan’s current situation with Sri Lanka, which defaulted on international payments and faced high inflation, which led to “bloody mass protests” very recently.
FAP Chairman Malik Bostan said Pakistan’s capital markets (currency and stocks) panicked and reacted abnormally to Pakistan Tehreek-e-Insaf (PTI)’s call for long march and protest in Islamabad in the ongoing month of May.
The local currency is hovering around Rs200 against the US dollar in the open market as compared to around Rs155 in August 2021, he pointed out.
“The rupee will not be allowed to depreciate further. It will partially recover to Rs180-182 against the greenback soon,” he said.
The central bank should act to control the rupee-dollar exchange rate and ask commercial banks to stop speculating the rupee depreciation, he said.
Similarly, Pakistan Stock Exchange (PSX) has declined almost 11% (or over 5,000 points) to 43,486 on Friday as compared to 48,726 points in the mid of June 2021 ahead of the then budget presentation in the parliament.
He said former prime minister Imran Khan is an educated and intelligent man. “Considering the worsening crisis, he should call-off the long-march in the best national interest,” Bostan said.
Prime Minister Shahbaz Sharif should convince Khan to come to the table for a dialogue.
“They should decide a timeline for the next elections and then let the economic managers take prudent measures and implement them to overcome economic challenges,” he said.
PM Sharif’s Economic Advisory Council’s (EAC) member Arif Habib said “the lack of decisions on the economy is weakening rupee”.
“People are worried about whether the government will timely act on honouring its commitments with the IMF (International Monetary Fund) or not and what are other possible solutions to come out of the crisis,” he said.
“We should support the government to implement the prerequisite conditions to resume the IMF multi-billion loan programme.”
“IMF programme is the only one viable solution in the short-run,” Habib said, adding that the release of the next tranche of $1 billion from the Fund would follow friendly countries to help Pakistan buildup its foreign exchange reserves and come out of the worsening balance of the international payment crisis.
Earlier, the IMF conditioned revival of its loan programme with withdrawal of subsidies on petroleum products and electricity, and imposition of additional taxes in the next budget for FY23.
“The removal of subsidies will jack up inflation reading, but will settle over the next one-year,” he said.
Pakistan’s reserves have depleted to less than a two-month import cover at $10.3 billion as compared to usual three months of import cover, mainly due to elevated current account deficit, he said.
The shortage of foreign currency was the biggest crisis in the domestic economy, as the value of import payments remained more than double the export earnings, he added.
Pakistan is estimated to face a shortfall of $27 billion in foreign expenditure to pay for imports and repay foreign debt over the next one-year, Habib said.
The government should cut import bills by $1-2 billion a month to overcome the balance of payment crisis.
Politicians and media should restrain from spreading negativity. “Foreign investors need certainty and stability before investing in any country including Pakistan.”
Federation of Pakistan Chambers of Commerce and Industry (FPCCI) former senior vice president Mirza Ikhtiar Baig underlined that traders have stopped bringing-in export proceeds in the country, waiting for a further likely depreciation in the rupee.
“Traders should be bound to bring-in the export proceeds sooner than later. It is our question of survival,” he said.
The government should immediately impose a ban on import of luxury items including cars for at least six months, he said.
Association of Builders and Developers (ABAD) Chairman Mohsin Sheikhani said that the government should have implemented its commitments with the IMF after its first official talks held in the US in April.
“The delay in implementation of economic decisions under the ongoing political drama has worsened the economic crisis,” he said.
It is the job of the government to give long-term economic policies, keep them consistent and implement them, he added.
Published in The Express Tribune, May 15th, 2022.
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