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Thursday March 28, 2024

Good news

By Dr Farrukh Saleem
June 26, 2022

April 11: Mian Muhammad Shehbaz Sharif took oath of the prime ministerial office. On April 11, the SBP’s liquid foreign exchange reserves stood at a paltry $10.4 billion less than seven weeks of import-cover. The maturity breakdown of short-term net drains on foreign currency at the SBP was $1.6 billion within 30 days, $4.2 billion within 90 days and $15 billion within a year. Lo and behold, on April 11, Pakistan was a mere 80 days away from a potentially disastrous sovereign default. Yes, the PTI had left behind a perfect storm. June 20: Pakistan submitted to the Financial Action Task Force (FATF) that Pakistan had largely and substantially completed 34 points of two simultaneous action plans. The good news is that the FATF accepted the compliance. The next step is verification of compliance for which a mission will come to Pakistan for an ‘onsite inspection’. The good news is that Pakistan is now on the cusp of exiting from the FATF’s dreaded ‘gray list’.

June 21: The good news came from the IMF’s resident chief in Islamabad who said that “important progress has been made over the FY23 budget.” Our Ministry of Finance declared that a ‘broad agreement’ had been reached. In my opinion, a ‘broad verbal agreement’ has been reached. This will be followed by a written Memorandum of Economic and Financial Policies (MEFP). The MEFP would then have to be signed by the minister of finance and the SBP governor. This signed MEFP would be sent to the IMF Board whose approval will result in a disbursement of $900 million. The real good news here is that PM Shehbaz Sharif has managed to avert a potentially disastrous sovereign default.

June 21: Good news on Roshan Digital Accounts (RDA). Dollars coming into RDAs hit the highest-ever daily figure of $57 million. Total RDA deposits now exceed $4.5 billion.

June 22: Good news from China. A Chinese consortium of banks signed a $2.3 billion loan facility which would take the SBP’s liquid reserves to over $11 billion. The same day the price of oil in the international market came down to $107 per barrel from a high of $128 per barrel some three months ago – that’s a drop of over 15 per cent.

Yet to hear good news from Saudi Arabia and Qatar. The World Bank had delayed the approval of a $400 million policy loan. There could be some additional good news coming from the Beijing-based Asian Infrastructure Investment Bank. There could be $2 billion worth of project loans from the Asian Development Bank (ADB).

The Punjab government is expecting inflows of $545 million from the World Bank, ADB, Danish International Development Bank, French Development Agency, International Fund for Agricultural Development, Foreign Commonwealth & Development Office and Japan International Development Cooperation Agency. The last day of the week, however, had some bad news when the stock market crashed in the wake of 10 percent supertax. This has certainly been a week of good news, but we are not out of the woods. The IMF has estimated that our gross external financing needs will hit a high of $41 billion. That’s unsustainable. We must put our house in order. We cannot continue to lose half a trillion rupees a year in our power sector. State-owned enterprises cannot continue to lose a trillion rupees a year. Cartels cannot be allowed to keep Pakistan uncompetitive in the global marketplace. And trillion-rupee leakage in public procurements must be made a thing of the past.

The writer is a columnist based in Islamabad. He tweets @saleemfarrukh and can be reached at: farrukh15@hotmail.com