THE fact that Qatar’s stated intention to invest $3bn in key commercial and investment sectors of Pakistan’s economy has failed to create positive vibes in the country’s stock and currency markets shows that the latter need more than such promises to lift their mood.

The ambiguity surrounding the gas-rich Gulf state’s plans and the time frame for the promised investment hasn’t helped either. It also remains unclear whether the pledged investment to be made through Qatar’s sovereign wealth fund — the Qatar Investment Authority — is in addition to the $2bn Doha has promised to deposit with the State Bank to help shore up its falling foreign exchange reserves and meet a requirement of the Islamabad-IMF deal, or if the two will overlap.

The Qatari pledge has come within weeks of a similar promise made by the UAE to invest $1bn in different sectors in Pakistan.

The investment promise from Doha coincided with a meeting of the Public Accounts Committee which was informed that no progress has been made so far on a proposed 2019 Saudi plan to invest $8bn in a new oil refinery in Gwadar, giving the markets good reason to be sceptical of the Gulf’s recent investment pledges. Although Riyadh also announced a $1bn investment plan for Pakistan on Thursday, the details are sketchy.

That said, realisation of the Qatari, Saudi and Emirates investment plans in a wide spectrum of businesses ranging from the hospitality and aviation industry to seaport terminals to LNG-fired power plants to solar power will significantly boost the State Bank’s dwindling foreign exchange reserves in the near term in a tough external environment. But it will not help tackle the structural problems faced by the economy and the latter’s chronic inability to earn dollars to pay its import bills.

Read: Is this a crisis like none other?

Pakistan is currently contending with one of the most serious economic crises in its history as it faces a balance-of-payments problem, which has forced Islamabad to turn to multilateral lenders and ‘friendly’ countries like China, Saudi Arabia, the UAE and Qatar for dollars to avert a default.

With foreign currency reserves dropping to below $8bn or less than one and a half months of imports, Pakistan is struggling to tackle a troubling current account deficit, one of the world’s fastest growing inflation levels and a weakening exchange rate.

Earlier this week, the State Bank had sought to calm the markets, saying that the country’s external financing needs had been more than fully met for the current fiscal, with reserves likely to double to $16bn by the end of the financial year.

That may be a — temporary — relief, but it has been achieved with borrowed money. The tough part is to address the long-standing structural issues plaguing the economy by boosting domestic productivity and exports, wooing private FDI to reduce debt, tackling balance-of-payment troubles and putting the economy on a sustainable, and faster growth path.

Published in Dawn, August 26th, 2022