Shrinking external receipts

The shrinking volume of external receipts during the ongoing fiscal year indicates a worsening balance of payments crisis in Pakistan in the coming fiscal year. The country has received $8.1 billion in the first 10 months of FY23 as against more than $13 billion in the same period last year, showing a 38 per cent decline, according to the monthly report on Foreign Economic Assistance by the Ministry of Economic Affairs. The 8.1 billion worth of receipts in the July-April period of FY23 stand at 35.5 per cent of the $22.8 billion full-year budget target. And this is despite the fact that the government has imposed strict curbs on imports to save its dwindling foreign exchange reserves from falling to the point of a financial default. For comparison, the inflows in the first 10 months of the previous fiscal year (i.e. FY22) stood at $13.03 billion – accounting for 93 per cent of the annual budget estimates of $14.1 billion, even though the full fiscal year assistance finally reached $16.975 billion.

The PDM coalition government has thus far been relying on assistance from friendly countries, including China, Saudi Arabia and the UAE, to avert a default on its foreign financial obligations, as a deal with the IMF continues to elude it since November 2022 when the last staff-level mission of the global lender had visited Pakistan. The sticking points – including a further raise in the central bank interest rate that has already reached a historic 21%, besides written assurances from friendly countries on bridging up the external financing gap – are too hard for an unpopular government to swallow, as they will further propel the rate of inflation which is already hovering in excess of 45%, amid growing job losses and paycuts. The situation necessitates an early deal with the IMF.

 

Published in The Express Tribune, May 22^nd, 2023.

Like Opinion & Editorial on Facebook, follow @ETOpEd on Twitter to receive all updates on all our daily pieces.