LCCI chief optimistic Pakistan will secure IMF bailout soon

LAHORE: Following United Arab Emirates’ pledge to dish out $3 billion for Pakistan to help the country enhance its depleting liquidity levels, the incumbent Lahore Chamber of Commerce and Industry (LCCI) President thinks Islamabad would surely secure its 13th bailout package from the IMF since 1980, second since 2013 and 22nd such financial assistance since 1957.

The LCCI Chief, Almas Hyder, hoped the transfer of around 11 billion Dirhams by the state-owned Abu Dhabi Fund for Development would make it easier for Pakistan to cope up with an otherwise-threatening balance of payments crisis in coming weeks and hence avert a looming economic disaster.

But at the same time, Almas Hyder, one of the key Pakistani business leaders, has raised some apprehensions regarding the tightening of foreign exchange regulations for importers especially.

Talking exclusively to the “Jang Group and Geo Television Network,” he raised a red flag that the likely foreign exchange restrictions on normal business transactions would affect the economy adversely if corrective measures were not initiated by the government by taking all stake-holders into confidence.

Almas Hyder said: “There is no doubt that the ongoing talks between the Islamabad and the IMF are aimed at securing a potential financing deal for external funding and to bridge widening current-account and fiscal deficits, but the government has tightened the foreign exchange regulations at a juncture when our raw material suppliers are demanding some cash in advance. Similarly, advanced Telegraphic Transfers and advances given against Letters of Credit (LCs) have also been subjected to tight controls in line with the July 15, 2018 Statutory Regulatory Order (SRO).”

The LCCI President viewed that businesses would badly be affected by these tight regulations as entrepreneurs were finding it uphill to fix the prices of their products in absence of any currency devaluation forecast.

The siting LCCI Chief, a Harvard University Alumni himself, further asserted: “The duties and levies imposed on raw material imports, for example spare parts, are quite arbitrary. And this state of affairs is fast rendering the local Pakistani industry totally uncompetitive. The local businesses are already finding it hard to compete against Chinese goods, smuggled products and the items produced in the highly incentivized tribal areas and the Pakistan-controlled Azad Jammu and Kashmir.

It goes without saying that closure of a local industrial units of all sizes is thus highly imminent and this must result in alarmingly high unemployment and poverty levels. We thus need to put in place more flexible exchange rate arrangements and tighter capital controls for an economy that is the 23th largest in the world in terms of Purchasing Power Parity, and 42nd largest in terms of Nominal Gross Domestic Product (GDP).”

However, Almas hailed government’s performance when it comes to a visible surge in private sector’s credit off-take from Rs 360 billion during the July to October 2018 period as against just Rs.110 billion during the same corresponding period last year.

He opined: “These above-mentioned figures signify an increase in demand of various products and improved public purchasing power. I also want to believe the World Bank prediction that Pakistan's economic growth will increase to a robust 5.4 per cent due to greater inflow of foreign investment by end of this year. But the numbers of our economy are not very healthy. So, at the same time, I have my fears too”

He went on to state: “See, Pakistan’s Nominal GDP rests at about US $310 billion today, the GDP at Purchasing Power Parity is $1.14 trillion, the GDP per capita stands at US $1641, we are ranked way below at 136th position out of 190 countries when it comes to ease of doing business, we have disappointing export numbers of $24.824 billion, fairly high imports of about $57 billion, the public debt is very high at 67 per cent of the GDP and the FOREX reserves are just $16.18 billion. These are not very ideal figures and there is nothing we can boast of.”

The Lahore Chamber President maintained: “Our main challenge is to reduce external imbalances. Given the size of our external deficit, additional measures should be considered, including exchange rate correction and rational fiscal and monetary tightening. Spheres contributing to the GDP should not be burdened by extra tightening of foreign exchange regulations. As I said, it has to be logical and rational. Easing foreign exchange regulations on imports and other current international payments would be highly desirable. The pace and composition of policy adjustment should be designed to reduce the adverse impact on economic growth and vulnerable segments of the population.”