Pakistan economy heading towards yet another IMF bailout package
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ISLAMABAD: Growth in Pakistan’s $300 billion economy surged to 5.3 per cent in 2016-17, its fastest pace in a decade, but the macroeconomic outlook has deteriorated, stoking concerns Pakistan may need an International Monetary Fund (IMF) bailout, as it did in 2013, to avert another balance of payments crisis.
Foreign currency reserves have dwindled by almost a quarter to $14.7 billion since last October, while the 2016-17 current account deficit has more than doubled to $12.1 billion.
PM Shahid Khaqan Abbasi has said Islamabad was looking at a raft of measures to alleviate current account pressures to avoid going back to the IMF, including reducing imports of luxury goods, boosting exports, and possibly devaluing its currency.
Finance Minister Ishaq Dar is a staunch opponent of a weaker rupee - whose level against the dollar is effectively controlled by the central bank - but Abbasi said it had been discussed.
“There are pros and cons to devaluation, but that could be a decision we take,” he said, adding that any devaluation would not be drastic, and “today, it’s not on the table yet.”
The prime minister said Nawaz Sharif remains hugely popular despite his disqualification by the Supreme Court on July 28.
“Politics is not decided in courts,” said Abbasi, who was jailed along with Sharif after the 1999 military coup. “Politically, Nawaz Sharif is stronger today than he was on July 28.”
Abbasi is also pushing ahead with a wide-ranging tax reform agenda before the elections.
The ruling PML-N party is looking for cross-party support for the reforms, but Abbasi said radical changes would require an integrated approach, including building confidence among tax payers, reducing income taxes and making it less attractive to invest in a real estate sector that attracts black money.
“You not only need to have a stick, you need to have a carrot also,” he said.
