Economy continues to face serious dollar crisis despite IMF program

LAHORE, Sep 10 (ONLINE): Despite the resumption of the IMF program, the country is still suffering from serious dollar shortage crisis, as the rupee has cumulatively fallen by more than 4 percent against the greenback during this week, aggravating macroeconomic indicators amidst catastrophic flooding in Pakistan.

This was stated by FPCCI former president and BMP Chairman Mian Anjum Nisar, warning that the fear of default is not yet over, however, it has been averted in the near-term while the medium-term risk still persisted, as the cost of damage caused by the floods has surpassed the IMF loan disbursement.

He said though the IMF program is finally back, yet the confidence of the investors is not restored, as the economic concerns in the mind of market participants have not ended due to multiple reasons. He said that the sorrows of the trade and industry in terms of high inflation, loss in employment, and lower profitability is not easing despite the restoration of the IMF program, as the electricity concession for the exporters has been withdrawn while petroleum levy on petrol and diesel have to be increased to Rs50/liter by Jan 2023, and perhaps, after that, the next step is to impose GST.

The BMP Chairman noted that like the rise in imports, remittances and exports did not increase to the required amount, thus, causing a disruption in the supply-demand position of the dollar.

He said that Pakistan’s foreign exchange reserves rose above $8 billion, reverting the threats of default that could have led to spill over into an economic crisis after the government managed to secure a much-needed loan from the International Monetary Fund. On September 2, the foreign currency reserves held by the SBP were recorded at $8,79 million, up $1.166 million compared with $7,69 on Aug 26. The central bank cited the receipt of $1,166 million from IMF under EFF program as a major reason behind the increase in reserves after nearly four weeks.

In spite of that the rupee persisted in losing its value for the sixth straight session against the US dollar at the end of the week, as the country continues to suffer an economic hit caused by heavy floods.