New Delhi: The external sector of the Pakistan's economy could come under extreme pressure after the inflow of money from the International Monetary Fund (IMF) stop next year.
The foreign exchanges coming from the IMF are going to dry up by the middle of next year. More importantly, Pakistan will start making loan repayments to the Paris Club — following the debt rescheduling of December 2001 – in 2016-17 while IMF repayments will begin from 2017-18.
In an interview to Pakistan tribune, country's business tycoon Aqeel Karim Dhedhi said, “I foresee a BoP crisis because exports are declining and foreign direct investment (FDI) is nowhere to be seen. We should forget about achieving a current account surplus this year.”
The Balance of Payments is the difference in total value between payments into and out of a country over a period. In simple words, money leaves the economy during a BoP crisis and the government finds it difficult to borrow further, thus wrecking the value of the national currency.
According to the latest export figures released by the State Bank of Pakistan (SBP), Pakistan's exports shrank by $538 million, or 9%, on an annual basis during the first quarter of the current fiscal year. Although the year-on-year rise in the FDI for Jul-Sept was $15.6 million, or 7.7%, the increase seems unimpressive in view of the GSP-Plus status that Pakistani exports enjoy in the European market.
Earlier in June, IMF released the eighth loan tranche of $506.4 million that will be made available to Islamabad this week under bailout organisation's bailout programme.
In September 2013, the IMF had approved a three-year Extended Fund Facility amounting to $6.6 billion.
Till now, the IMF's total disbursements since September 2013 is $4.1 billion.
Pakistan's Finance Minister Ishaq Dar however, remains defiant as he sees building SBP-held foreign exchange reserves from just about $3 billion in November 2013 to almost $15 billion as a big achievement . Critics, however, point out that most of these reserves owe their existence to foreign debt.
