Islamabad has plans up its sleeve to evade BoP crisis

ISLAMABAD: In order to avert the Balance of Payment (BoP) crisis, Pakistan has made alternate plans for meeting the yawning dollar financing gap for avoiding plunging into a full-fledged crisis till the stalled IMF program is restored.

Pakistan requires dollar inflows on an immediate basis to restore confidence as the current account deficit rose sharply and foreign currency reserves were depleting at an accelerated pace.

“Without having an alternate plan, the country might plunge into a major crisis-like situation on external account when there will be general elections around the corner in July/August 2022,” top official sources said while talking to The News here on Tuesday.

Pakistan and the IMF were so far unable to strike a consensus on the completion of the 7th Review and release of the $960 million tranche under the $6 billion Extended Fund Facility. The IMF has indicated holding talks with the new government and keeping in view the fluid political situation, the restoration of the IMF program seems in danger.

This scribe contacted Federal Secretary Finance Hameed Yaqoob for seeking his comments. He replied, “We are trying to get Chinese funding rolled over at the earliest. We will use alternate modalities for importing oil such as on deferred payment by Saudi Arabia and ITFC (IDB). We will also seek commercial funding.” He said that the UAE had rolled over its loan a month ago while the Chinese rollover was in process.

Top official sources said that China had agreed in principle for granting a rollover of a $2.5 billion commercial loan last week but so far Beijing authorities were processing its rollover. The official said that the Chinese could respond well to our request for a loan rollover of $2.5 billion.

Many officials who knew the working said that Pakistani authorities should have contacted the Chinese side several months ago before the maturity of commercial loans. If it was not done, then it’s negligence. However, there is another possibility that the Chinese might have refused to roll over loans earlier but after intervention at the highest level when Prime Minister visited China, Beijing authorities might have shown willingness to move ahead. Then former foreign minister, Shah Mehmood Qureshi, visited China last week as follow up and requested a rollover of a $2.5 billion commercial loan which, according to him, China had agreed in principle to grant and its processing has kick-started.

Many independent economists, especially Dr Ashfaque Hasan Khan, were advising the government to refrain from the IMF programme and develop homegrown reform agenda. On a short term basis, he suggested the imposition of a ban on luxury items to save dollars. He had asked several times that there was no need to import cheese, animal food, luxury vehicles and other such items. Pakistan’s trade deficit soared to $35.39 billion during the first nine months of the current fiscal year and it was heading toward touching the $50 billion mark if the luxury items imports were not curtailed with full force.

When contacted, Member Economic Advisory Council and renowned economist Dr Ashfaque Hassan Khan said that he suggested to the government to slap a ban on fast-moving and high-value non-essential items of imports to curtail imports to the tune of $10 to $15 billion.

“A dollar saved is a dollar earned,” he said and added that he had asked during the EAC meeting to form a committee but no one bothered. He said that if the imports were not curtailed, then the country might have to pay a heavy price for this inaction.