‘Economy heading to complete collapse unless action taken’

KARACHI: The economy is heading towards a complete collapse unless action is taken to remedy the crisis caused by financial meltdown and political uncertainty, currency dealers warned on Saturday.

They said the country is gradually heading towards the Sri Lankan crisis-like situation on the back of increasing economic and political uncertainties which can be turned around through dialogue and practical economic policies.

"We are only 30 days away from Sri Lanka in the current economic crisis,” Zafar Paracha, the general secretary Exchange Companies Association of Pakistan told a conference titled "Strong Rupee – Strong Pakistan" organised by Forex Association of Pakistan (FAP).

“Emergency must be imposed and all the stakeholders make efforts to restore economic stability in the country,” Paracha added.

FAP Chairman Malik Bostan said the economy is on the brink of collapse and the rupee has been falling steadily for the past one month due to political instability and rampant foreign borrowing.

“For the past two months, foreign investors have not invested in Pakistan's T-bills at all, which is why Pakistan's reserves have started falling,” Bostan said.

“The local unit, which has weakened by 40 rupees in the last eight months in the interbank market, may strengthen to 180-182 per dollar, if the government implements the proposals presented by the head of exchange companies to the finance minister Miftah Ismail.”.

The exchange companies proposed that they should be facilitated to boost the flow of remittances to Pakistan. Measures were also suggested to curb the outflow of foreign exchange from Pakistan through informal channels.

Bostan noted that the dollar is currently rising due to the political confrontation. The trade deficit is at an all-time high, reaching nearly $40 billion in the last 10 months.

“It could rise to $50 billion in the next two months. Even now, if we do not take the nails of consciousness, the dollar will get out of control,” he added.

“The government should immediately reduce its monthly imports from $6.25 billion to at least $5 billion.”

Addressing a conference, Arif Habib, member economic advisory council and charmain of Arif Habib Limited, said the biggest problem of the country was lack of forex exchange. Pakistan’s imports exceeded its exports, and the country faced a $27 billion current account deficit annually, he added.

The exports and remittances have improved this year and around $30 billion remittances come to the country.

“Overseas Pakistanis will have to be provided investment opportunities in the country, '' Habib said.

“Real estate returns have been good in five years. There are economic challenges, despite being an agricultural country, there is a lack of good management, trust of the IMF is necessary for the country now.”

The rupee had depreciated sharply in recent years, investors were fearful, political instability had hurt foreign investment, the business community must step in and put pressure on political parties, and the government must work to increase exports, he urged. “It has become necessary to abide by the conditions of the IMF,” Habib said.