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Why Pakistan’s Crashing Economy Could Face “Bad Days Ahead”

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Pakistan had hoped for an early revival of the bailout, but the IMF has not released the installment.

Karachi:

Pakistan’s Finance Minister Miftah Ismail said on Friday that the government would continue to curb imports for the next three months, as he warned of “bad days” for the cash-starved country.

Addressing a function at the Pakistan Stock Exchange here, the minister said the government led by Prime Minister Shahbaz Sharif is suffering due to economic policies led by Prime Minister Imran Khan, who was deposed by the former Pakistan Tehreek-e-Insaf regime. .

“During the previous Pakistan Muslim League-Nawaz (PML-N) government, the country’s budget deficit was US$1,600 billion, and in the last four years under the Pakistan Tehreek-e-Insaf regime, this figure rose to US$3,500. ” TV quoted Ismail as saying.

“No country can grow more stable with such a current account deficit,” he said.

“When you increase the budget deficit and also increase the debt by 80 per cent, it has an adverse effect on the economy,” he said.

“I will not allow imports to increase for three months and in the meantime, we will come up with a policy. I understand that growth will slow down a bit but I have no other option,” Dawn newspaper quoted the finance minister as saying. as saying.

Pakistan’s import bill for the last fiscal was US$80 billion, while exports stood at US$31 billion.

He said that the present government has to save the country from possible defaults and take immediate and short-term measures. “Maybe it was unwise in the long term,” he lamented.

“We are on the right track, but obviously we may see bad days. If we control our imports for three months, we can boost our exports in different ways,” he said.

Talking about the exchange rate, Ismail said that the outflow of the dollar was crossing the inflow, which is why the rupee fell sharply against the dollar in the past month.

The Pakistani rupee rose 2.15 against the US dollar to touch 224 against the greenback on Friday for the sixth consecutive session during intra-day trade in the interbank market.

Pakistan’s currency has hit an all-time low of 240 since Khan’s ouster in April, amid uncertainty over IMF aid.

Last week, New York-based rating agency S&P Global revised Pakistan’s long-term rating from ‘stable’ to ‘negative’ due to rising inflation and tighter global financial conditions.

Pakistan reached an employee-level agreement with the IMF last month, followed by months of unpopular belt-tightening by the government, which took power in April and effectively ended fuel and electricity subsidies and the tax base. Introduced new measures to broaden the

The new government has cut subsidies to meet the demands of global financial institutions, but risks the wrath of voters already struggling under the weight of double-digit inflation.

Pakistan had hoped for an early revival of the bailout, but the IMF is yet to release the much-needed installment.

Esther Perez Ruiz, the IMF’s Resident Representative for Pakistan, said earlier this week that the country had met the final preconditions for raising petroleum development tariffs for the joint Seventh and Eighth reviews, following a staff-level agreement.

The USD 6 billion bailout package was originally signed by former prime minister Imran Khan in 2019 but has repeatedly stalled when his government backed out of subsidy agreements and failed to significantly improve tax collections.

Pakistan is in dire need of IMF loan.

In July, the fund said that if approved by its executive board, it would increase the value of the bailout from US$6 billion to US$7 billion, which is generally considered a formality.

Sharif has repeatedly blamed the former prime minister’s government, alleging that Khan – a former cricket star-turned-Islamist politician – had deliberately violated the IMF’s terms in order to remain popular among followers at home.

(This story has not been edited by NDTV staff and is auto-generated from a syndicated feed.)

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