Economy revival impossible without IMF help: PBC

ISLAMABAD: The Pakistan Business Council (PBC) said on Monday that the national economy could not be revived now without the help of the International Monetary Fund (IMF) programme, and immediate measures were needed on the part of the coalition government to avert a Sri Lanka-like economic situation.

In a series of tweets, the major business entity said that “All roads to restoring economic stability lead through the IMF. “Without revival of the programme, no further help from friendly countries is likely. Indeed the deposits presently lodged with the State Bank of Pakistan to prop up reserves are also vulnerable to withdrawal,” the Council said.

The PBC believes that the coalition government is caught between a rock and a hard place. “The right thing to do is to replace the general with a targeted subsidy for fuel,” suggested the Council, adding that the government must find ways to limit consumption and import of fuel to preserve the dwindling foreign exchange reserves to buy wheat and edible oil.

The Council said: “Inaction [on the part of the government] will entail serious consequences bordering those in Sri Lanka. Higher rate of inflation is inevitable even with the subsidies, given the direction of the rupee.”

The PBC said that unless the State Bank of Pakistan (SBP) takes a differentiated approach to cost-push inflation, a higher policy rate will further impact the formal sector and raise the cost of borrowing for the government. Fiscal prudence should be given a chance to match the monetary tightening already in place, suggested the forum.

“Time will tell if the government has the courage and stamina to do the right thing. In the meantime, it would be wise to brace for further economic turbulence,” added the statement issued on twitter.