Small mercies

Published May 15, 2022

AT a time when Pakistan is getting closer to the brink with its foreign currency reserves dropping to just around $10bn on a soaring trade deficit, even a hint from the ADB of additional funding of $2.5bn during the next financial year is a relief. The funding is to be made under ADB’s programme loans and its Countercyclical Support Facility, a relatively new facility to help countries to finance their oil imports amid an unprecedented hike in global commodity prices. The Manila-based bank has also indicated that up to 60pc to 80pc of these funds would be disbursed before December to mitigate the adverse impact of the higher international commodity prices caused by Covid-related supply disruptions and the Russia-Ukraine war on Pakistan’s balance-of-payments position. Meanwhile, the State Bank has reported that the April remittances sent by Pakistanis living abroad to their families have shot up to $3.1bn — the highest in any given month. It gives hope that the current fiscal year’s target of $30bn remittances will be achieved, somewhat slowing down the haemorrhaging of forex reserves, which have already dropped by over $6bn since February because of the soaring trade and current account deficits.

We should be grateful for small mercies. But our balance-of-payments trouble is too deep-rooted to go away with small cash injections. We must put our house in order if we wish to end our periodic ‘boom-and-bust’ cycles. With the cost of energy subsidies — announced by the previous government and continued by the present set-up — for the next fortnight estimated to spike to Rs75bn, it is time the authorities decided to remove the price cap on fuel and electricity prices as a first step to show that they intend to pursue sound economic policies. Unless the government takes this unpopular decision, there is little hope of a deal with the IMF, the talks for which are set to begin in Doha next week. Getting dollars from lenders, ‘friendly’ countries and international markets without coming under IMF discipline will be next to impossible. Saudi Arabia and the UAE are already said to have told the prime minister to seek the Fund’s blessings before expecting fresh funds from them. Returning to the global bond market will be difficult and expensive with yields on Eurobonds floated earlier already spiking to 16pc. If the PML-N led coalition plans to rule for the remaining tenure of the assemblies, it should start taking decisions now.

Published in Dawn, May 15th, 2022

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