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Tuesday April 16, 2024

Pakistan needs to stay committed to economic reforms: Blome

According to him, economic reforms will provide investors with confidence and certainty and facilitate economic growth

By Erum Zaidi
March 05, 2024
— US Embassy Islamabad
— US Embassy Islamabad

KARACHI: US Ambassador to Pakistan Donald Blome has emphasised the country’s need to stay committed to economic reforms, saying that doing so would aid in alleviating the burden of debt and external financing while fostering economic growth.

“Pakistan has made good progress confronting serious economic challenges during the past six months by successfully implementing the current IMF programme,” Blome told a group of journalists in an interview at the US Consulate in Karachi on Friday.

He noted that the country’s economy remains vulnerable to shocks such as Russia’s illegal invasion of Ukraine, devastating floods, and trade disruptions such as current events in the Red Sea, but continued progress on key reforms can help buoy the economy.

“The economic policies developed over the next several months will be crucial to maintaining economic stability for Pakistanis, and our belief is it will take a concerted effort to ensure it moves in the right direction,” Blome said.

According to him, economic reforms will provide investors with confidence and certainty and facilitate economic growth driven by inclusive, sustainable, and economic development if Pakistan remains committed to its reform agenda.

“We are confident Pakistan can do this and break free from an overreliance on unsustainable debt.”

Almost four weeks after an uncertain national election caused delays in the formation of a coalition government, Shehbaz Sharif formally took the oath of office as Pakistan’s prime minister for the second time. The newly-formed government will need to start tough negotiations with the IMF immediately to secure a new bailout, as the current standby arrangement is set to expire in April.

Blome, who took over as the US ambassador to Pakistan in 2022, said that the challenges facing the country are well-defined and that some of the policy responses to those difficulties should also be clearly defined.

“I think one of the first things, in all likelihood, the new government will have to address will be finding a way ahead with a new IMF programme,” he said.

“And we certainly encourage the government to work with the IMF on a reform programme that makes sense for Pakistan to help it break this cycle of indebtedness and required international financing, which, you know, constrains other kinds of things for any country that’s involved with it. So I certainly think there’ll be areas where there’s policy continuity.”

Blome, when asked, about the newly elected government’s capacity to control the economic crisis, said any Pakistani government right now faces a challenging environment with a very difficult debt situation.

“I think there’s several things that any government’s going to have to do. It’s going to have to find ways that it can raise the revenues that it needs to meet its payment obligations,” he said.

“It’s going to have to introduce fiscal reforms, and that, of course, includes energy that allows it to get its budget back in balance and reduce reliance on external borrowing, which has become more and more difficult,” he added.

“So all of those things, I think, will create a more healthy Pakistani environment and also an economic environment, and one that’s going to reassure investors and would be a major factor in attracting additional, not just external, but also internal investment.”

Speaking about the abilities of the new government to negotiate a new IMF programme, as well as carrying out the stringent conditions, he said: “I think there’s some consensus developing in the country overall on some of the things that are required for the economy to turn itself around.”

“So, yeah, I think they can implement these. They’re hard to do for any government, for sure. So, you know, nothing is a given. But yes, I think they can do it.”

Blome denies the assertion that the US assists Pakistan in obtaining IMF bailouts. According to him, the IMF follows the guidelines established by its board. The US is one member of the board, along with many other countries.

“So I think, you know, to the extent some people think it’s somehow manipulated behind the scenes, it’s not. It is a professional staff that is trying to set parameters that will help the countries that are subject to IMF programmes succeed and graduate from them,” he said.

“We’re supportive of the IMF process. We try to help Pakistan find ways to meet the requirements of IMF programmes that Pakistan agrees to,” he said. “It’s a process by which Pakistan negotiates the parameters of the programme and agrees to things that Pakistan thinks it can do, and it’s in Pakistan’s interest to do. So that’s what we want to see and what we want to help with.”

However, according to Blome, the US has taken several steps to assist Pakistan in overcoming its economic difficulties in the past year. It has revived some of its high-level economic dialogue, including a ministerial-level trade dialogue. The US has a robust assistance programme for Pakistan, primarily in the form of technical assistance aimed at helping Pakistan implement policies, regulations, and other measures that are conducive to economic growth.

US-Pakistan Green Alliance Framework: Many of the issues that the US and Pakistan consider to be important are covered within the Green Alliance Framework. This includes Pakistan’s energy transition to renewables, which will be extremely helpful in lowering its need for expensive imported fuels.

The US envoy mentioned smart agriculture, water management, and climate resilience as more crucial areas. Pakistan and the US have been cooperating for a long time in several of these areas. Thus, the new Mangla Dam turbine project was inaugurated last year.

“We’re doing the same at the Tarbela Dam. Hopefully, we’ll be highlighting that soon as well,” he said. “That’s something like 10 percent of the energy production and powering 50 million households in Pakistan over a long period,” he added.

“We had recently helped the energy ministry produce the first open tender for solar power here from Pakistan; we did that through USAID technical assistance.”

He said that the United States is exploring measures to help Pakistan address its fiscal imbalances by enabling it to accelerate and catalyse the energy transition.

There is a huge potential for the two countries’ trade and investment ties to grow. The US, Pakistan’s largest export market, sees enormous potential for boosting two-way trade and investment between the two countries, and it’s been a major priority for me as ambassador, he said.

More than 80 US companies operate in Pakistan right now, making the US one of Pakistan’s leading investors.

“And we saw about $250 million in foreign direct investment from the US alone in FY22. And we want to see more US investment flow into Pakistan,” he said. According to him, several sectors in Pakistan are already quite successful in exporting to the United States.

“I think Pakistan has to find ways to look where it can be competitive in US markets. And I think there are many possibilities,” he said. “Traditionally, of course, this has been focused on textiles and a few other sectors. But the US economy and the level of US imports are enormous, and there’s a huge room for growth, I think, in the trade relationship between our two countries,” he added.

“So we will continue to look for ways to help ensure that Pakistan’s economic stability and Pakistani companies have opportunities in the United States. We’d, frankly, also like to see Pakistanis investing in the United States, just like we do. I’m sure US firms will look for opportunities to invest in Pakistan, as they have in the past,” Blome said.

When it comes to collaborating with the new administration, he would give top emphasis to finding ways to strengthen trade and economic relations between the two countries, he said.

Regarding the Special Investment Facilitation Council, he said that whatever aims to enhance the nation’s investment climate is beneficial.

“So a company that’s interested in trying to diversify its supply chain and find new suppliers, it’s going to have many options... and Pakistan has to have an aggressive approach to trying to attract that investment to Pakistan, as many other countries do.”