Govt maintaining forex reserves

Miftah assures exchange-rate stability to control inflation amid flood damages

APP September 01, 2022
Flood devastation may force the government to make additional imports of cotton worth $2.6 billion and wheat worth $900 million. photo: file


Federal Minister for Finance and Revenue Miftah Ismail said, on Wednesday, that Pakistan has been trying to maintain an optimum level of foreign exchange reserves amid flood damages to ensure exchange-rate stability and control inflation.

During a meeting with a delegation of Coca Cola Icecek Pakistan, led by its General Manager Ahmet Kursad Ertin, the minister said the current floods have been causing huge life losses and financial drainage.

The delegation members congratulated the minister on successfully securing the International Monetary Fund (IMF) deal and appreciated the business-friendly policies of the government.

They briefed the minister about the operational nature of the Coca Cola Icecek Pakistan and shared their significant contribution to the overall GDP of the country. And apprised him regarding Coca Cola Icecek Pakistan’s plan to undertake new investment expansion due to greater potential offered by the Pakistani market and the issues related to imports of certain items.

Appreciating the growth and tax revenue generation of the company for the economy of Pakistan, the finance minister assured the delegation that their outstanding issues would be resolved at the earliest, keeping in view the permitted financial limit for imports.

“The government is curtailing unnecessary imports,” he said in a press statement issued by finance ministry.

In the week ended on August 19, the foreign currency reserves held by the State Bank of Pakistan were recorded at $7,809.9 million, down $87 million compared with $7,897.3 million on August 12.

According to a research house report, the unusual heavy monsoon rains and flash floods are initially estimated to cost Pakistan’s economy over $4 billion in the current fiscal year as the calamity has badly impacted around 38% of agricultural activities in Sindh and Balochistan.

While it is early to assess the actual impact, Pakistan, which heavily relies on agriculture that has 23% share in gross domestic product (GDP), could be in a vulnerable position in the aftermath of the floods.

Repercussions may include higher imports, compromise on exports and higher inflation, undermining government’s efforts to ward off recent macro headwinds.

“Based on our preliminary estimates, current account deficit may increase by $4.4 billion (1% of GDP) – assuming no counter-measures are taken, while around 30% of CPI (Consumer Price Index) basket is exposed to the threat of higher prices,” JS Global Research said in its report late last week.

The devastation may force the government to make additional imports of cotton worth $2.6 billion and wheat worth $900 million. The country may also lose textile exports of around $1 billion. Overall impact of all this comes to around $4.5 billion (1.08% of GDP) in the current fiscal year.

Following the flash floods, essential food items such as onion, tomato and chilli may face a supply deficit.

The worst affected crop is cotton and farmers are feared to reap a poor harvest in Sindh. “Cotton sowing has reportedly been destroyed to a large extent (in Sindh),” the JS report said.

Separately, a delegation of the All Pakistan Akhbar Farosh Federation (APAFF), headed by its Central Secretary General Tikka Khan, met with the Federal Minister and apprised him about concerns related to the decision to curtail the supply of newspapers in government departments.

Expressing the government’s resolve to support the media industry and its associated organisations and people, he said, “The government believes in the social uplift of the masses and aims at resolving their issues at all levels to support them,” he said.

Published in The Express Tribune, September 1st, 2022.

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