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Rupee plunges after reports by World Bank, IMF

In a report by the World Bank, the financial institution reduced Pakistan's growth forecast by one percent and criticized the outgoing government's last-minute subsidies on fuel and electricity prices.

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A day after Prime Minister Shahbaz Sharif’s cabinet took oath in a ceremony televised on state media, the Pakistan stock market shed over 340 points. At midday, the market index stood at 45,984 after experiencing a contraction of 0.7 percent from its previous close of 46,333. The market reached its peak of 46,586 points before midday.

Moreover, the Pakistani rupee further depreciated and lost Rs 1.56 against a dollar to reach Rs. 186 during midday trading at the interbank foreign exchange market.

Analysts attribute the recent plunge of the stock market and devaluation of the rupee to the forecast by the International monetary bank and the report by the World bank. In a report by the World Bank, the financial institution reduced Pakistan’s growth forecast by one percent and criticized the outgoing government’s last-minute subsidies on fuel and electricity prices. It noted that the said subsidies had derailed the economy and threatened loan payments from the IMF under the loan program. The World Bank said that the decisions seemed to be made with political considerations in mind and not economic ones. It added that the subsidies could have been spent on “more productive projects” that would have stimulated growth and economic prowess.

Read More: Finance Ministry rebuts int’l media news on Pakistan’s state of economy

Moreover, the report attributed high inflation to the decline in the growth rate projection. It added that the only other country with similar inflation rates was Sri Lanka, which recently claimed bankruptcy. The international monetary fund released a similar report in which it forecasted Pakistan’s economic growth rate at four percent. The lending agency also projected Pakistan’s current account deficit at 5.3 percent of GDP (up from just 0.6pc last fiscal year) and a seven percent unemployment rate, a sharp contrast from what the government had initially aimed for.

On Saturday, Miftah Ismail, the incumbent Finance Minister of the country, wasted no time to blame the preceding government for its mismanagement and mishandling of the economy, adding that “We simply cannot afford to walk in the minefield PTI has left for us.” He further underlined that the PTI government had “tied our hands” by its monetary and fiscal commitments.

On the other hand, Marriyum Aurangzeb, the newly appointed information minister, during a federal cabinet briefing on Wednesday, released a one-page document dubbed “Reality of Naya Pakistan – Deterioration on all fronts,” which she claims reflects unprecedented economic disasters and “criminally irresponsible fiscal acts in last four years under IK [Imran Khan].” She stated that “inflation, poverty, unemployment, debt & deficits rose.” Finally, she added that Imran Khan’s term “was marred by corruption.”

Read More: Government revisits the decision not to increase petrol prices

Responding to the alleged mishandling of the economy, former spokesperson for Finance Ministry Muzzammil Aslam refuted the claims made by the minister and said that “The first briefing to the cabinet is misleading.” He called the incumbent cabinet “liars” and noted how the report conveniently “forgot to mention exports and remittances.”

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