State Bank of Pakistan (SBP) Acting Governor Dr Murtaza Syed cautioned during an interview with The News, “we are not close to recession mode but there is a need to handle the economy in a careful manner.”
Dr. Murtaza clearly said that Pakistan would continue to experience boom and bust cycles unless structural reforms in the economy are brought in. He pointed that the GDP growth during the last fiscal year came in at 6pc, which led to “overheating” and caused imbalances.
He emphasized that the country would have to increase its exports and foreign direct investment to avoid the boom-and-bust cycles. Also, he highlighted the role of private sector which is vital to attract dollar inflows.
“Currently, the IMF helps to manage the external financing gap. When the Fund programme ends, there is no binding force to [make] the country stick to the path of the reform process” he added.
Moreover, he said that Pakistan had experienced external and internal economic imbalances due to the reversal of structural reforms in the past.
He claimed that Pakistan’s external financing gap was “not huge.” However, it became problematic because it was only the government’s responsibility to bridge the gap whereas in other countries, private sector in helps in this regard.
In addition, Dr. Ali Chaudhry Research Advisor at the SBP during his podcast recommended to incentivize private enterprises to go beyond borders and make themselves sustain there.
He highlighted that model of financing the current account deficit must change as in case of Pakistan, government brings in the new machinery. In case of Turkey, it’s the private enterprises which go abroad and self-sustain while bringing benefits for the country.
The SBP chief declined that the country was facing a debt crisis, stating that its overall debt was “manageable.”
On the other hand, Dr. Ali Chaudhry in his podcast marked management of debt as a significant problem which needs to be improved. He said, “planning was not great, and we had to go to the IMF.”
Revival of the IMF loan programme is considered as a short-term solution to the problems faced by the country for which financing gap of $4 billion is to be covered.
However, authorities are hopeful to close this gap soon as friendly countries are willing to plug in. Saudi Arabia is the first country that has agreed to give commitment to the IMF.
Despite of facing energy crisis, high inflation rates, currency depreciation and depleting foreign reserves, authorities are still hopeful that the economy will revive and is not in recession mode. Although, with all the conditions listed, it is hard to accept that the country is not in recession. On the other side, development regarding foreign investments into the country is also a positive signal.