By Faisal Kamal Pasha

ISLAMABAD, Aug 22 (INP-WealthPK): After the International Monetary Fund’s (IMF) Letter of Intent (LOI) to release two tranches worth $1.7 billion by the end of this month and Saudi Arabia’s plans to renew its $3 billion deposits in Pakistan, the country’s economy and financial market are witnessing upward trends.

Dr Viqar Ahmed, Joint Executive Director of Sustainable Development Policy Institute (SDPI), while talking to WealthPK, said the country has not only averted the perils of default, but now it is also out from the top-10 countries with highest food inflation, which is a good omen for Pakistan’s economy.

“The Chinese government has given Pakistan a year roll over as far as the payable debts are concerned, but it has also given Pakistan $2.5 billion loan facility, while the United Arab Emirates (UAE) will also give $1 billion to Pakistan,” Dr Viqar said.

Pak rupee that had been on decline, is now gaining strength against the US dollar and at interbank it is trading at 214 in comparison to August 1, when it was trading at 238. On August 15, Pakistan Stock Exchange gained 473 points, while on August 16, it gained 700 points.

Dr Viqar said that this financial upsurge could be temporary unless and until Pakistan increases dollar inflows and squeezes the outflow volume.

The major burden on Pakistan’s economy is oil imports. To a question that recently there had been a significant decline in the prices of crude oil in international market, Dr Viqar said that the government cannot pass on relief to the public due to certain reasons. He said that the governments do agreement for the import of oil three to four months before the imports.

“So, we shall be paying backdated prices of three to four months, and the relief is a little far away,” he explained.

He said foreign remittances are doing well, and for this fiscal year, it has crossed $30 billion.

“The major problem remains our $75 billion imports, and a good portion consist of food items like edible oil, tea, pulses, cotton, wheat and sugar. As an agricultural country, we need to adopt austerity measures, and raise agricultural yield to curtail this import bill.

This year, Pakistan has to return five to eight billion dollars, which will affect our economy.

Dr Viqar said the most important step should be the reduction in the prices of petroleum products and electricity that will give boost to industrial sector. He said the IMF programme has ended the uncertain situation for the time being, and the government needs to adopt long-term policies to prevent uncertainty in the long run.

The IMF programme is connected with loan facilities and financial aid from different other lending institutions like the World Bank (WB), Asian Development Bank (ADB), etc. It was green signal from the IMF that made Saudi Arabia renew its $3 billion deposits with Pakistan, while the WB and ADB are likely to support Pakistan through project loans and programme loans. These lending institutions provide grants and budgetary support for development projects.

“In that connection, Pakistan’s economy will be doing good but agriculture and industrial sector need government support and attention,” Dr Viqar added.

Credit: Independent News Pakistan-WealthPK