By Sajid Irfan

ISLAMABAD, Aug 17 (INP-WealthPK): Acting Governor of State Bank of Pakistan (SBP) Dr. Murtaza Syed said Pakistan will soon be able to bridge the external financing gap of $4 billion with the help of Saudi Arabia, Qatar and the UAE.

The financing will help shore up the foreign exchange reserves and cut inflation. Murtaza said additional dollar inflows will be used to increase the foreign currency reserves in order to build a safety net in the event of a crisis-like situation.

Talking to WealthPK, Assistant Professor from the Quaid-i-Azam University, Islamabad Dr. Amanat Ali said there was an urgent need for dollars to save Pakistan from a crisis-like situation.

He said Saudi Arabia, Qatar and the UAE had announced $4billion funding for Pakistan to boost its foreign exchange reserves, adding that the SBP should also focus on decreasing inflation. Pakistan will need to increase exports and foreign direct investment in order to maintain or to increase foreign exchange reserves.

“Pakistan also reached a staff-level agreement with the international lender on July 13 to resume the loan program. However, the IMF board is tentatively scheduled to hold a meeting to approve it after the country manages to get adequate financing assurances from other sources to meet its external financial obligations,” he added.

Dr. Amanat said according to the acting governor, Pakistan had achieved six percent GDP growth, but overheating of the economy had resulted in imbalances such as budget and current account deficit.

He said Finance Minister Miftah Ismail had appealed the IMF to expand its loan programme to $8 billion and to increase its tenure to June 23. The IMF opposed trade restrictions and also undertook some steps to avoid depletion of foreign currency reserves. Now it is hoped that the existing pressure on foreign reserves would evaporate in the next two months. He also advocated conservation of energy for reducing pressure on the import bill.

Dr. Amanat said the SBP governor said that Pakistan would have to boost exports and foreign direct investment to avoid perpetual plunging into boom-and-bust cycles. This boom and bust cycle cannot be overcome until the private sector attracts dollar inflows. Depleting reserves, a widening current account deficit and rupee depreciation against the dollar have left the nation facing a balance of payments crisis.

He further explained that the Asian Infrastructure Investment Bank and Islamic Development Bank had announced $400million to $500 million for Pakistan and hopefully they will increase their funding. The rupee will strengthen against the dollar when the agreement with the IMF gets finalized.

“Inflation is hovering around at about 26% at the moment and the government is trying to bring it down to 18 to 20%, which too would be unbearable for the people in view of their ever-squeezing purchasing power and inability to maintain living standards”, he added.

Emphasizing certainty and consistency of policies, Dr. Murtaza said economic or political instabilities would not serve any purpose adding that higher growth on sustained basis was required for one to two decades.

Credit: Independent News Pakistan-WealthPk