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Monday May 27, 2024

How growth was lost

By News Desk
April 20, 2024
How growth was lost

Rising inflation rates and depleting reserves were among the extraordinary economic difficulties Pakistan faced during the leadership of then finance minister Ishaq Dar and the Pakistan Democratic Movement (PDM) government. Dar imposed harsh import restrictions in an attempt to prevent a sovereign default because the State Bank of Pakistan's (SBP) reserves were dangerously low, not even enough to pay for a month's worth of imports. However, a slowdown in economic growth was a result of these policies. The US dollar's artificial value under Dar's leadership resulted in notable differences between interbank and open market exchange rates.

The PDM administration requested assistance from the International Monetary Fund (IMF) when the state was on the brink of default. A $3 billion Standby Arrangement (SBA) was agreed upon between Pakistan and the IMF in July 2023. Throughout the current fiscal year, the SBP has kept the policy rate at around 22 per cent, which effectively controlled inflation but at the cost of economic growth. The private sector's borrowing has fallen dramatically and, as a result, so has growth. In order to stimulate the economy, banks must begin lending to the private sector again.

Hamza Munir

Mardan