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