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Miftah sees $2bn inflow before govt term ends

Updated May 24, 2018

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ISLAMABAD: Minister for Finance Miftah Ismail is addressing an investment seminar on Wednesday.—APP
ISLAMABAD: Minister for Finance Miftah Ismail is addressing an investment seminar on Wednesday.—APP

ISLAMABAD: The government is expecting up to $2 billion inflows from a friendly country before the caretaker prime minister sets in next week.

Finance Minister Dr Miftah Ismail told Dawn that he expects $1-2bn before the tenure of the PML-N government ends on May 31.

He declined to identify the source and exact amount of inflows, saying things were in process but insisted one to two billion dollars would be added to the country’s foreign exchange reserves.

Informed sources, however, said inflows were expected from a state-owned Chinese Bank and would support declining foreign exchange reserves which stood at $17.067bn as of May 11 - $10.8bn held by the State Bank of Pakistan and $6.268bn by commercial banks.

Pakistan had earlier received a $1bn loan from China at end-April that would be due for repayment in three years.

The government has already revised its estimates for external resources to almost $12bn from the original budget estimates of around $8bn; more than doubling commercial loans to almost $7.2bn from around $3bn for 2017-18.

The current foreign exchange reserves can cover less than three months of imports that have grown at an average rate of 15.6pc in the first nine months to $38.4bn despite the recent slow down to 6pc in March. Exports, in comparison, have posted a 13pc growth in nine months over the last year to reach $15bn, despite a healthy 24.4pc growth in March.

At the end of 2017-18, exports are estimated to reach $25bn compared to full-year estimated imports of about $54.5bn, leaving a trade deficit close to $29.5bn.

After accounting for healthy remittances estimated at $20bn, the government expects the current account deficit by the end of the current year at about $16bn or 5pc of GDP. Reserves have been depleting at an average rate of $475-$500 million a month.

For next year, the government expects exports to go up to $27.3bn against estimated imports of $56.5bn, leaving a trade deficit of $29.2bn and current account deficit estimated at a conservative $12.5bn (3.8pc of GDP) for next fiscal year.

The full year current account deficit for the outgoing fiscal year is estimated at $13.7bn or 4.4pc of GDP. Therefore, the government concedes that high fiscal and current account deficits in 2017-18 may pose a challenge on the external front going forward.

Published in Dawn, May 24th, 2018