ON WEDNESDAY last week, the country’s stock market rallied to celebrate the unexpected Saudi package announced by Riyadh a day earlier.

The greenback lost some ground to the weakened rupee in interbank trading as external account outlook started looking less shaky than a few days ago.

Pakistan’s debt and import financing requirements for the next several months are expected to narrow further. Beijing is all set to announce its own financial assistance and investment plan for Islamabad during Prime Minister Imran Khan’s first China visit before an IMF team arrives here in early November to open talks for a new loan facility.

Pakistan, according to Foreign Minister Shah Mahmood Qureshi, has also requested from UAE a deferred payment facility for its oil imports from the wealthy gulf state, similar to the one given by Saudi Arabia.

Mr Khan, who some say has unmatched skills in raking up cash when he needs it for his projects, is also hoping for a deferred payment facility for palm oil imports from Malaysia in addition to some dollars when he tours Kuala Lumpur this week.

Businessmen argue that the balance-of-payments support from ‘friendly’ countries and the IMF will only provide the government with breathing space

Business confidence in the country seems to have ‘improved drastically’ as Islamabad appears to be in a stronger position to steal a softer loan deal from the Fund to further ease the pressures on its external account.

But has confidence actually improved?

Businessmen argue that the balance-of-payments support from ‘friendly’ countries and the IMF will only provide the government with breathing space. The long-term plan to avert another similar crisis in three to five years requires implementation of politically tough structural reforms in the medium- to- long-term to boost industrial and agricultural exports, and increase remittances.

“(These) loans will indeed bring short-term stability,” insists Mohammad Ali Tabba, the chief executive of Lucky Cement, who says Pakistan’s debt and import bill financing requirements for the next 18 months stand at $22 billion.

“For (achieving) medium-term stability, we need to make our (present) exports of textiles and clothing, light engineering, etc competitive so that our exporters can fetch more dollars and encourage flow of remittances.

“The long-term plan should focus on investments in new sectors like heavy engineering, automobiles, cement, agriculture, and so on for export diversification. Moreover, we should convince Gulf nations to import labour from Pakistan, which will boost our remittances.”

Ehsan Malik, the chief executive officer of the Pakistan Business Council, that represents the interests of the country’s large corporations, concurs with him. “The pressure on balance-of-payments situation may ease for now, but the fundamental source of periodic external account crisis — negative trade balance — will remain.

“What will happen if we are unable to increase our exports or global oil prices start resurging? We should drastically boost our investment level from the present 15 per cent to 16pc of GDP to spike exports and encourage import substitution where possible for a positive balance of trade.”

Indeed, the new government has implemented some actions to make the existing export-oriented industries internationally competitive by ensuring continuous energy supplies and slashing gas and electricity prices to the regional level.

“These steps will go a long way in boosting our exports,” Ali Ahsan, All Pakistan Textile Mills Association chairman, says.

But in the same breath he wants the government to pay exporters billions in refunds held by the Federal Board of Revenue to ease the liquidity crunch facing many exporters; allow duty-free import of cotton and discourage tax-free import of yarn to boost domestic products.

“Pakistan will not need balance-of-payments support from anyone in the future if the government helps us with a level-playing field and fully enables us to increase our share in the global markets,” he says.

Abdul Aleem, the CEO of the Overseas Investors Chamber of Commerce and Industry (OICCI) that represents foreign investors operating in Pakistan, finds the Saudi package “a huge confidence building” move.

“The government is now in a relatively comfortable position to seek economic assistance from other friendly countries, especially China, and execute tax and governance reforms.

“In the interest of long-term economic stability it is desirable that our efforts should focus not only on immediate funding needs (from China) but also on getting fair and durable trade concessions to reduce imports and boost value-added and diversified exports from Pakistan.”

Ehsan Malik feels that Pakistan must get IMF dollars even if it thinks it can execute fundamental structural reforms to fix the economy.

“The bureaucracy does not seem to be cooperating with the government at present. In this situation, it will be difficult for the government to undertake reforms without pressure (on the bureaucracy) from the Fund. Besides, it will enable the country in raising funds from other international sources and woo foreign investment.”

The OICCI chief says Pakistan has tremendous growth potential and should not have been in this difficult economic situation.

“You can say that the country currently is operating well below its capability and capacity... These are challenging times and there is a need for special measures from all stakeholders to work together and show the world that when it comes to national interests we are on the same page.”

Published in Dawn, The Business and Finance Weekly, October 29th, 2018