Clarification

This refers to the article, ‘Financial emergency’ (Sep 25) by Dr Farrukh Saleem. The article exaggerates the economic challenges facing the country while downplaying its economic strengths. It uses selected data of various economic indicators to fit his views and opinions. The article presents a less-informed, lopsided and overexaggerated picture of the external sector challenges, while ignoring that many emerging market economies are also facing similar challenges. It does not mention how an increase in commodity prices and a strengthened US dollar have increased pressures on the external sector globally. The writer has used a mix of the latest as well as slightly old data to make his points. The latest number of the SBP’s foreign exchange reserve numbers ($8.3 billion) and the total imports are mentioned, but the article contains nothing on deceleration in imports seen in recent months. The current account deficit number of $17 billion (for FY22) is used to highlight the need for financial flows without mentioning that both domestic analysts and IFIs have projected the $9-10 billion current account deficit for FY23, something which would reduce gross financial requirement by over $7 billion.

The article presents only the outflow side of the external accounts (import payments, debt obligations, etc) and ignores exports growth, strong remittance inflows, foreign investments, and inflows anticipated in FY23. It is to be noted that Pakistan’s exports and foreign remittances are in excess of $60 billion per annum. Pakistan has successfully completed the seventh and eighth review of the IMF in early September 2022. This signifies confidence in the government’s resolve and policy initiatives to combat the external sector challenges. Foreign exchange inflows anticipated later in FY23 in accordance with the IMF programme, moderation in significant export and remittance inflows will soon reduce the external sector pressures. The government is confident that Pakistan is in a position to not only meet its financing requirements but also rebuild its forex reserves to more than two months of imports over the next few months. Finally, the government is also committed to following strict fiscal discipline, and the fiscal deficit for FY23 is also projected to remain below Rs 5 trillion, not Rs6 trillion as predicted in the article, even in the aftermath of economic challenges posed by the devastating floods.

Finance Division

Government of Pakistan