Wednesday, June 07 2023

Budget: With or without IMF?
Peek-a-boo between Pakistan and the International Monetary Fund (IMF) is almost as old as the country. Both sides appease their audience and the recent exchange of statements by the two has to be seen in this light. IMF’s Mission Chief to Pakistan Nathan Porter, responding to some questions, said: “We take note of the recent political developments, and while we do not comment on domestic politics, we do hope that a peaceful way forward is found in line with the Constitution and rule of law.” Ideally, the IMF should have avoided this statement as it does not serve any purpose, especially if getting the programme back on track is the goal. A government already under pressure on economic and political fronts was bound to respond to it. And so, it did. Overall, these statements from both sides have no meaning in terms of the Extended Fund Facility (EFF) outcomes — the ninth review was handcuffed by external financing gaps five months before these jibes were exchanged. And so it remains. This statement, however, can strengthen the already widely accepted and deep-rooted perception that the global lender is influenced by political factors while setting conditionalities and implementing programmes.
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More of the same, or worse? What economists expect from upcoming budget
Last year we thought the government was going to announce ‘one of the toughest budgets yet’, and yet, here we are once again, at the same point, but worse. The coalition government is set to announce the federal budget for the fiscal year 2024 on June 9. Since the beginning of the year, each month seems to compete with the last to climb the inflation ladder, reaching a record 38 per cent in May. In the midst of political chaos, the watchful eye of the International Monetary Fund (IMF) (which has requested to review the budget), Pakistan’s debt servicing obligations, and an election year, Dawn.com asked economic experts what they expect from the upcoming budget. Dr Aqdas Afzal This budget will be presented against the backdrop of the most challenging political and economic environment this country has witnessed since 1971. Where Pakistani people are facing the highest-ever inflation at almost 38pc, poverty and unemployment have been steadily increasing.
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Shift away from fossil fuel-based economy: Akhtar
Pakistan Stock Exchange (PSX) Chair­person Dr Shamshad Akhtar has said the country’s “extreme dependence” on fossil fuels to achieve gro­wth has ruined the environment at a high economic cost. Speaking at a seminar on the role of business in protecting the environment organised jointly by the Pakistan Institute of Corporate Governance (PICG), Overseas Investors Chamber of Commerce and Indus­try (OICCI) and Unilever Pakistan Ltd, Dr Akhtar said the economic bill of climate change is so huge that accounting for it would double the country’s annual external financing requirements of around $29 billion. Pakistan is the fifth most vulnerable country in terms of its vulnerability to climate change, according to the Global Climate Risk Index. The OICCI estimates the country has incurred $3.79bn in economic losses in 20 years while losing nearly 10,000 lives to climate-related disasters between 1998 and 2018.
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National Econo­mic Council sets economic growth target at 3.5pc
Accommodating the demands of the coalition partners, the PML-N-led National Econo­mic Council (NEC) on Tuesday tentatively approved an overall development budget of Rs2.709 trillion, almost 24 per cent higher than the current year’s budget estimates of Rs2.19tr. This includes a federal public sector development programme (PSDP) of Rs1.15tr, including Rs200bn for public-private partnership and cumulative provincial annual development plans of about Rs1.159tr. With this public sector investment in mind, the NEC — the country’s highest forum of the federation on economic decision-making — set a GDP growth target of 3.5pc for next year from a paltry 0.3pc this year against a budget target of 5pc. It was disclosed for the first time before the council that Pakistan’s population growth, according to the latest census stood at 3.6pc, making it the fastest-growing country in the world. With this rate, the participants were warned, the country’s population would go far beyond 340 million by 2035 —adding almost double the size of South Korea’s current population in 10 years.
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Dollar loses Rs5 in open market
The rupee turned in a mixed performance on Tuesday as it recovered to Rs303 in the open market, but suffered slight losses in the interbank market due to persisting confusion about the country’s economic direction. However, the dollar’s quoted price was lower than the available price. Currency dealers said the price was not lower than Rs306 per dollar while availability of the dollar was not common. The closing price of dollar in the open market was Rs303 on Tuesday — a gain of Rs 5 for PKR over the previous day’s Rs308. The shortage of dollars has been a permanent feature of the open market since inflows dried up from all possible sources. Due to a grey market that offers Rs320 per dollar, the remittances from exchange companies have almost reduced to zero. “The general public is also reluctant to sell their dollars or other foreign currencies due to fluctuation in the dollar rates,” said a currency dealer. He said the currency market had shrunk to the lowest level. “The open market is so thin that an inflow of just one hundred thousand dollars could change the greenback price across the country,” said the dealer.
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