Pakistan faces ’horrendous’ challenges
ISLAMABAD: Pakistan’s next government, to be chosen in a July 25 election, faces growing fears of a balance of payments crisis, with speculation it will have to seek its second International Monetary Fund (IMF) bailout in five years, say analysts.
The central bank is running down its foreign reserves and devaluing the currency in a bid to bridge a yawning trade deficit, and the winners of the July 25 election will have “limited time” to act, said Fitch ratings agency on July 2.
Together, the economic challenges were “horrendous”, said Dr Ashfaq Hassan, an analyst and former financial adviser to Pakistan government.
Pakistan has been battling to get its shaky economy back on track and end a years-long chronic energy crisis that has crippled industry.
Confidence had grown slightly in recent years, with security improving and the IMF claiming in October that the country had emerged from crisis after completing its post-2013 bailout programme.
The previous government of former prime minister Nawaz Sharif attempted to ease the power shortages, enact structural reforms and improve the creaky infrastructure which previously hampered growth.
China has also made progress on an ambitious multi-billion dollar infrastructure project — the China-Pakistan Economic Corridor — linking its western province of Xinjiang to the Arabian Sea via Pakistan.
But growth has not been as fast as many hoped. The economy grew by 5.8 per cent during 201718, its fastest since 2005 but still missing a government target by 0.2 per cent. Public debt now sits at roughly 70 per cent of gross domestic product.
Amid stability fears, the caretaker government pledged last month to stem the current account deficit with rapidly dwindling foreign reserves.
According the State Bank of Pakistan, the country’s reserves plunged to US$9.6 billion (RM36.7 billion) on June 22 from US$16 billion on April 17.