WASHINGTON: A weakening economy is forcing Pakistan to seek another loan from the International Monetary Fund (IMF) and may also affect its ability to buy defence equipment, says a report released this week.

The report by Avascent, a consulting firm which advises international defence contractors, revi­ews the impact of this economic slowdown on Pakistan’s defence purchases, but it also includes a brief review of the nat­ional economy.

“Pakistan’s current account deficit stands at $14 billion, over 5 per cent of the GDP, while its foreign exchange reserves have dwindled to $9.6 billion, enough to cover only two months of imports,” says the report.

“In a move seen as paving the way for an IMF loan after national elections on July 25, the country’s central bank has devalued the rupee three times since December 2017. A weaker currency makes imports more expensive, further constraining Islamabad’s ability to buy defence equipment and spare parts in US dollars.”

The report claims that negative trends in its relationship with the United States, a depreciating rupee, and its untenable foreign exchange position, is forcing Pakistan to reach out to other countries for support, particularly China.

The report points out that Pakistan has received over $5 billion in bilateral and commercial loans from China this fiscal year, including a $1billion loan in early July. In addition to the China-Pakistan Economic Corridor (CPEC) — a package of infrastructure projects worth an estimated $62 billion — Pakistan has also turned to Beijing as a source of defence imports.

“Over the next decade, Beijing will become the single most important arms supplier for the Pakistani military,” the report adds.

Published in Dawn, July 30th, 2018

Follow Dawn Business on Twitter, LinkedIn, Instagram and Facebook for insights on business, finance and tech from Pakistan and across the world.

Opinion

Editorial

Budget for stabilisation
Updated 13 Jun, 2024

Budget for stabilisation

The proposed steps lack any “disruptive policy changes", especially to "right-size" the govt, and doubts remain on authorities' ability to enforce new measures.
State of the economy
13 Jun, 2024

State of the economy

THE current fiscal year is but another year lost. Going by the new Pakistan Economic Survey, which maps the state of...
Unyielding onslaught
Updated 13 Jun, 2024

Unyielding onslaught

SEVEN soldiers paid the ultimate price in Lakki Marwat on Sunday when their vehicle was blown up in an IED attack,...
X diplomacy
Updated 12 Jun, 2024

X diplomacy

Both states can pursue adversarial policies, or come to the negotiating table and frankly discuss all outstanding issues, which can be tackled through dialogue.
Strange decisions
12 Jun, 2024

Strange decisions

THE ECP continues to wade deeper and deeper into controversy. Through its most recent decision, it had granted major...
Interest rate cut
Updated 11 Jun, 2024

Interest rate cut

The decision underscores SBP’s confidence that economic stability is gaining traction.