Political turmoil negatively impacting economy: Abbasi

islamabad — Prime Minister Shahid Khaqan Abbasi said political turmoil is hobbling investor confidence and negatively impacting the country’s economy before national polls next year.

While Abbasi said Pakistan’s economic growth rate is still set to hit a targeted six per cent in the financial year through June, corruption investigations against top members of the ruling party and religious protests in the capital are deterring investors.

The government sought to sell as much as $3 billion in dollar bonds this week to bridge its widening current-account deficit and shore up dwindling foreign reserves. They raised $2.5 billion.

“There is uncertainty in the country ever since these affairs have surfaced,” Abbasi said in an interview in Islamabad on November 24, referring to the leaking of files from a Panama law firm last year. That leak brought about the downfall of former prime minister Nawaz Sharif in a corruption scandal revolving around his family’s purchase of highend apartments in London.

Taking over after Sharif was ousted

there is uncertainty in the country ever since these (Panama Papers case) affairs have surfaced. It definitely impacts growth, the economy and investor confidence

Shahid Khaqan Abbasi, Prime Minister

in July by the Supreme Court, Abbasi’s administration has been shaken by weeks of right-wing religious protests that brought the capital to a standstill and forced the resignation of the country’s law minister.

Adding to Abbasi’s challenges, he also took over the finance portfolio after granting Finance Minister Ishaq Dar medical leave in London last week. Dar also faces corruption charges related to the Panama probe and could be arrested if he returns to Pakistan. “It definitely impacts growth, the economy and investor confidence,” Abbasi said, adding he would continue to be finance minister through the government’s current term that ends on June 4.

Pakistan’s politics and an increasingly precarious macroeconomic position led to the biggest foreign outflow this year from Pakistan’s stocks since the 2008 financial crisis, even as the country was restored to emerging-market status by index provider MSCI Inc.

Abbasi’s government is betting that more than $55 billion of Chinese finance infrastructure projects across the country will boost economic growth to the fastest in more than a decade. However, China’s Belt and Road initiative is also adding to a surge in imports, which has contributed to the deterioration in Pakistan’s current account position.

The World Bank estimated in October that $17 billion of external financing — or 5 per cent to 6 per cent of gross domestic product — is needed in the current financial year through June for Pakistan to bridge its debt payments and current account deficit, which more than doubled to $14.4 billion in the year through September.

Abbasi reiterated that Pakistan doesn’t need a bailout.

“This deficit is temporary as you are in expansion phase where machinery and other things are increasingly being imported,” he said. “This deficit will go away when the growth comes.” — Bloomberg