By Sajid Irfan

ISLAMABAD, July 26: The ongoing financial year may prove challenging for Pakistan owing to the increase in prices of different items in the international market and the depreciation of the rupee against the dollar, WealthPK reports.

A report, recently released by the State Bank of Pakistan, said that economic activities were affected badly in the country by the depreciation of the rupee. “The current economic situation is unsatisfactory. This fiscal year is more challenging,” it added.

Commenting on the report, Dr Amanat Ali, an associate professor at Quaid-i-Azam University Islamabad, said that due to the global price hike, the fiscal year 2022-23 was more challenging for the economy of Pakistan as compared to the Covid-19 pandemic. “The reason for the worst condition of the economy is the rapid depreciation of the Pakistani rupee against the dollar,” he added.

He said that political instability and hefty import bill were the main causes of the depreciation. “Pakistan’s import increases due to spike in the prices of the global commodity,” he added.

Dr Amanat said that for a few days there was uncertainty about the revival of the International Monetary Fund (IMF) programme, which affected the exchange rate. He said that budget for the financial year 2022 was presented in light of the commitments made by the government to the IMF for the revival of its extended fund programme.

He said that the economy of Pakistan was faced with challenges owing to external and internal factors. He feared that the political situation ahead of the general elections in the country in 2023 might continue to affect the national economy.

“Pakistan badly needs the assistance of IMF for its immediate balance of payments as well as for longer-term economic stability. The situation forces the government to make tough economic decisions like abolishing subsidies and increasing taxes,” said Dr Amanat.

He said that delay in the release of funds to Pakistan by IMF could further deteriorate the situation. He added that the rupee would recover after the IMF disbursed the next tranche of loan worth around $2 billion by the end of July 2022.

Credits: INP-WealthPk

“The revival of IMF programme soon would increase foreign financing inflow to Pakistan from friendly countries and other financial institutions including the World Bank and Asian Development Bank,” he told WealthPK.