‘European crisis will not affect Pakistan too severely’

SBP governor says Pakistan has enough foreign reserves to repay IMF loan.

ISLAMABAD: Pakistan has more than enough reserves to cover loan repayments to the International Monetary Fund (IMF), as most of its debt is owed to international lenders, not global markets.

This was stated by the State Bank of Pakistan (SBP) Governor, Yaseen Anwar, while addressing the 26th SAARC Finance Group Meeting and the Governors’ Symposium on ‘The impact of the EU crisis on South Asian economies’ here on Tuesday.

“Our largest concern right now is the repayment of IMF loans; however, as of now, we do have more than enough reserves to cover our dues,” he remarked.



He said that Pakistan’s greatest concern would be the impact of a persistent recession in the EU on its current account balance.

Anwar argued that most of Pakistan’s exports consist of low-value added products whose demand is relatively inelastic, and that Pakistan has one of the lowest unit prices for these products in the region. Therefore, he said, most of Pakistan’s trade is actually with other Asian countries, insulating the economy from a fall in demand from Europe.

The SBP head said that the implications of the crisis were straightforward. “Demand for our goods and services from the continent will not rise, and inflows from Europe to finance our external accounts are likely to be few and far between and our financial system will have to be wary of its exposure to European sovereign securities,” he remarked.

“On the other hand, as investors look to pull out of Europe, they would be interested in this region. As developing markets,” said Anwar, “we have the potential to offer them a safer and higher rate of return on their investments.”

“In the case of Pakistan, however, there is an urgent need for structural reform before we can be in a position to attract inflows from foreign investors looking to limit their exposure to Europe,” warned Anwar.

Remittances have grown strongly, despite the current slowdown in the rest of the world, as a result of the Pakistan Remittance Initiative. The programme has been instrumental in increasing the volume of remittances received by the country.

Published in The Express Tribune, June 19^th, 2013.

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