The article titled “Financial emergency” by Dr Farrukh Saleem published in daily “THE NEWS” today exaggerates the economic challenges facing the country while downplaying its economic strengths. The author has made use of selected data of various economic indicators to fit his views and opinions.
In particular, the article presents a less-informed, lopsided and over exaggerated picture of external sector challenges, while ignoring that many emerging market economies are also facing similar challenges. Globally, increase in commodity prices and a strengthened US dollar has increased pressures on external sector, which the author has not alluded to in his opinion.
The author has conveniently used a mix of latest and slightly old data to make his points. For instance, the latest SBP’s foreign exchange reserve numbers ($8.3 bn) are mentioned followed by mentioning of import numbers in a causal manner. The deceleration in imports in the recent months has been completely disregarded.
Similarly, current account deficit number of $17 bn (for FY22) is used to highlight the need for financial flows without mentioning that the same for FY23 is projected at around $9-10 bn by both domestic analysts as well as IFIs, something which would reduce gross financial requirement by over $7 bn.
The article also presents only the outflow side of the external accounts (import payments, debt obligations etc.) while conveniently ignoring altogether, the upbeat exports growth, strong remittance inflows, foreign investments, and inflows anticipated in FY23. It is to be noted that Pakistan’s exports and foreign remittances are in excess of $ 60 bn per annum.
Pakistan has successfully completed 7th and 8th review of the IMF’s Extended Fund Facility in early September 2022. This signifies confidence in the government’s resolve and policy initiatives to combat the external sector challenges. Foreign exchange inflows anticipated later in FY23 in accordance with the IMF program, moderation in significant export and remittance inflows will soon subside the external sector pressures.
The government is confident that Pakistan is in a position to not only meet its financing requirements but also rebuild its forex reserves to more than 2 months of imports over the next few months.
Finally, the government is also committed to follow a strict fiscal discipline and the fiscal deficit for FY23 is also projected to remain below Rs 5 trillion even in the aftermath of economic challenges posed by the devastating floods. The articles tries to create an unwarranted alarm by claiming that the fiscal deficit will be Rs 6 trillion.