External financing gap

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ACTING Governor of State Bank of Pakistan (SBP) Dr Murtaza Syed has once again sounded optimistic about the success of the efforts being made by the country to secure more financial assistance from some friendly countries to bridge the worrisome gap in external financing.

In an interview, he pointed out that Pakistan has already managed gross external financing requirements of $34 to $35 billion but in addition, Islamabad is making efforts to get confirmation of $4 billion inflows from friendly countries such as Saudi Arabia, the UAE and Qatar for increasing foreign currency reserves position to create a buffer in case of a crisis-like situation.

There is no doubt that not only the relevant senior officials but top leadership of the Pakistan Army too is trying its level best to secure firm commitments for a financial package of about $4 billion to help meet one of the pre-conditions for the resumption of the stalled programme of the International Monetary Fund (IMF), the fate of which remains uncertain despite a staff level agreement between Pakistan and the Fund.

We have been hearing for the last several weeks that countries like China, Saudi Arabia, the UAE and Qatar are willing to provide the required assistance but nothing substantial has emerged so far.

The remarks of the Acting Governor of the central bank are encouraging but the fact remains he could not give a time-frame for the purpose, which means uncertainty would remain there for days, if not weeks, in this regard and as a result the economy would continue to suffer.

His comments that the existing pressure on the country’s foreign exchange reserves would ease in two months, together with remarks of Finance Minister Miftah Ismail that power rates would start coming down after three months, do not augur well for the devastating new spell of inflation caused by a nose-dive in the value of rupee, rising prices of POL products and a record increase in prices of electricity that have badly disturbed household budgets.

Inflation is hovering around at about 35% 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.

It is rightly believed that both the Federal Government and the central bank were not doing enough to support the falling rupee, a measure that offers a satisfactory way out of the existing messy situation.

Similarly, the Utility Stores network was used in the past to offer essential items to consumers on subsidized rates but now prices of products at USC outlets were closer to the open market.

The existing policy needs to be reviewed for the sake of the vulnerable segments of the society.

 

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