Islamabad has plans up its sleeve to escape the BoP crisis
ISLAMABAD: In order to avert balance of payments (BoP) crisis, Pakistan has drawn up alternative plans to bridge the gaping dollar financing gap to avoid plunging into a full-blown crisis until the stalled IMF program is reinstated.
Pakistan needs an influx of dollars on an immediate basis to restore confidence, as the current account deficit has risen sharply and foreign exchange reserves are being depleted at an accelerating rate.
“Without having an alternative plan, the country could plunge into a major crisis situation for external reasons when there are general elections around the corner in July/August 2022,” senior official sources said during from an interview with The News here on Tuesday.
Pakistan and the IMF have so far been unable to reach consensus on the completion of the 7th review and the release of the $960 million tranche under the $6 billion Extended Financing Facility. of dollars. The IMF has indicated that it is in talks with the new government and given the fluid political situation, the restoration of the IMF program seems in danger.
This scribe contacted Federal Finance Secretary Hameed Yaqoob to ask for his comments. He replied, “We are trying to get Chinese funding as soon as possible. We will use alternative modalities to import oil, such as deferred payment by Saudi Arabia and ITFC (IDB). We will also seek commercial financing. He said the UAE renewed their loan a month ago as the Chinese renewal was underway.
Senior official sources said China had agreed in principle to provide the renewal of a $2.5 billion commercial loan last week, but so far authorities in Beijing were processing its renewal. The official said the Chinese may well meet our $2.5 billion loan renewal request.
Many officials familiar with the operation said the Pakistani authorities should have contacted the Chinese side several months ago before the commercial loans were due. If this is not done, it is negligence. However, there is another possibility that the Chinese refused to roll over the loans earlier, but after some high-level intervention during the Prime Minister’s visit to China, the authorities in Beijing could have shown their willingness to go from the front. Then-foreign minister Shah Mehmood Qureshi visited China last week as part of a follow-up and requested the renewal of a $2.5 billion commercial loan that , according to him, China had agreed in principle to grant and his treatment started.
Many independent economists, in particular Dr. Ashfaque Hasan Khan, advised the government to refrain from the IMF program and develop an internal reform program. In the short term, he suggested imposing a ban on luxury items to save money. He had repeatedly asked that it was not necessary to import cheese, animal feed, luxury vehicles and other similar items. Pakistan’s trade deficit soared to $35.39 billion in the first nine months of the current fiscal year and it was heading towards the $50 billion mark if imports of luxury items were not drastically reduced.
When contacted, Economic Advisory Council member and renowned economist, Dr Ashfaque Hassan Khan, said he had suggested the government ban imports of non-essential fast-moving high-value items. to reduce imports by $10-15 billion. .
“A dollar saved is a dollar earned,” he said and added that he had asked at the EAC meeting to form a committee, but no one cared. He said if imports were not reduced, the country could face a heavy price for this inaction.