Need to fix the default fox

Pakistan’s economy continues to be in shambles. But it is reassuring to hear from the helm of affairs that the country will not default. The firm words came from Finance Minister Ishaq Dar, as he addressed the media in a video-link conference. He went on to promise that the due payment of $1 billion on December 5, on the dollar bond will be honoured, and necessary funds are forthcoming in this regard. This installment is on the maturity of five-year Sukuk or Islamic bonds, and has been in the headlines for a long time. As the economy is strangulated and deep in a mess, owing to depletion of foreign currency reserves, a rising import bill and, last but not least, a depreciating rupee, it is widely feared that it is on the verge of an imminent default.

The finance wizard had to do a lot of plain-talking as he made it a point to convince the nation that bankruptcy is not round the corner. He had to touch-base on credit default swap, the current account deficit which is staring right in the face and the downgrading of the economy at the hands of global rating agencies. Notwithstanding his assurances, coupled with Minister of State Dr Aisha Ghaus Pasha’s statement on the floor of the National Assembly that there is nothing to worry about and the economy is responding, there are not many takers. The fox is in the woods and it has to be fixed. Simple statistics at hand paint a dismal picture, and that cannot be ignored. Inflation is around 44 per cent, the rupee has lost more than 32% of its value, the greenback is being traded on double indexes of bank and open market, foreign currency reserves have slumped to around $7.5 billion and coupled with tranches sitting with commercial banks they account for a mere $13 billion.

There are few genuine worries and they go beyond the immediate of default fears. It is agreed that Pakistan has never defaulted, and shall technically be sound in book-keeping with international lenders, but the point is that it is mired in a crisis of confidence. This particular factor can only be overcome by inducing political stability — which is nowhere in sight with former prime minister Imran Khan out on the streets, demanding fresh elections forthwith. Investors and expatriates have reasons to smell a rat, and do not agree with the glossy picture being shown to them. The fact that cash roll-overs from the UAE, Saudi Arabia and China are keeping it afloat is never lost on anyone. Time to mend the fences and come out strongly.

Published in The Express Tribune, November 22^nd, 2022.

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