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Pakistan expects CAD to decline by $2bn, informs IMF of projection

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1 year ago

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  • Govt expects imports to decline in remaining period of FY24.
  • Finance ministry expects improvement in overall trade balance.
  • Pakistan’s external financing requirements stand at $28 billion.

ISLAMABAD: While not moving away from the envisaged macroeconomic framework, Pakistan has communicated to the International Monetary Fund (IMF) that it expects the Current Account Deficit (CAD) to decline by $2 billion to end at $4.5 billion compared to the $6.5 billion projected till the end of June 2024, reported The News on Tuesday.

The downward projection of CAD indicated that the government was expecting that imports would continue to decline in the remaining period of the current fiscal year.

Amid difficulties in materialising the external dollar inflows up to the desired mark, Pakistani authorities have no other option but to reduce the CAD to avert a balance of payment crisis.

Pakistan’s external financing requirements stood at $28 billion — foreign debt servicing of $23.5 billion and CAD projection of $4.5 billion.

After the signing of the IMF agreement under the $3 billion Stand-by Arrangement (SBA) programme, the forex reserves saw an improvement in July 2023, but in the last two months, the pace of external loans and grants has slowed down. Now the authorities are expecting that completion of the first review of the IMF programme would push up the dollar inflows from multilateral and bilateral creditors.

Economist Dr Hafiz A Pasha estimates that the external financing gap may be around $6 to $7 billion for the current fiscal year and the completion of the IMF review would help Islamabad to reduce this gap.

“The current account deficit stood at $0.947 billion in the first quarter of the current fiscal year, so overall the CAD is expected to be restricted at $4.5 billion against earlier projections of $6.5 billion for FY24,” sources told The News on Monday.

These projections have been shared with the visiting IMF’s review mission which is engaged with Pakistani authorities under the $3 billion SBA programme.

The government projects that the exports would be around $30.843 billion while imports would stand at $64.7 billion in the current fiscal year.

The finance ministry’s projections of seeing an improvement in the overall trade balance are based on its hope of increasing exports of rice in the wake of increased production of 2 million tonnes of rice and 5 million additional bales of cotton. However, the sources said that the import bill might be reduced from a projected amount of $64.7 billion to $58 billion for the current fiscal year.

There is another risk that the remittances might also witness a reduction on account of the envisaged target as it might stand at less than $30 billion against the official projection of $32.889 billion for the current fiscal year.

The government expects that the GDP growth rate may hover around 3.5% after improved performance of the agriculture sector and large-scale manufacturing sector growth of around 3%.

The Consumer Price Index (CPI) based inflation is expected to hover around 21% on average in the current fiscal year. The reduction in imports of commodities, improved exchange rate and better supply of goods would help to reduce inflation on a monthly basis in the remaining period of the current fiscal year.

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Business

Dar chairs the CCOP meeting; Blue World’s bid offer of Rs.10 billion is rejected.

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The Foreign Minister/Deputy Prime Minister chaired the Cabinet Committee on Privatization meeting.

Other committee members who attended the conference included the Federal Secretaries of several Divisions, the Ministers of Finance and Revenue, Industry and Food, Commerce, Power, and Privatization.

The CCOP took the PC Board’s recommendation into consideration and suggested that Blue World’s bid of 10 billion rupees for the sale of 60% of PIACL’s shares be rejected. The bid was rejected by the CCOP, who chose to follow the PC Board’s advice.

The government’s determination to sell out PIACL through government-to-government or privatization was reaffirmed by the CCOP.

The CCOP was pleased with the Aviation Division’s evaluation of PIACL’s sound financial standing.

Additionally, the CCOP established a committee, chaired by the Minister of State for Finance, to assess potential transaction possibilities for the privatization of the Roosevelt Hotel and the appropriate modes of adoption in light of existing legal rules.

Prior to its subsequent meeting, the CCOP also ordered that all difficulties be resolved and an agreement for the selling of services to an international hotel be concluded.

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The KSE-100 Index has surged by 790 points, resulting in an all-time peak for the stock exchange.

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The benchmark KSE-100 Index increased by 790 points, marking a new all-time high for the Pakistan Stock Exchange (PSX) at 94,982 points.

The record-breaking performance underscores a surge of optimism and investor confidence in the stock market.

As investors responded to favorable economic signals, the market experienced a significant increase of over 500 points in early trading. Later, the KSE-100 Index reached another record level of 94,786 points after adding 594 points to its upward trajectory.

This positive development comes as the State Bank of Pakistan’s (SBP) foreign exchange reserves saw an increase of $84 million, reaching $11.26 billion during the week ending November 8, according to data released by the central bank on Thursday.

This represents an increase of 0.75% from the previous week. In addition, the nation’s total liquid foreign reserves experienced a modest increase, increasing by $33.7 million or 0.21% week-on-week to $15.97 billion.

In contrast, commercial banks’ reserves experienced a decline of $50.3 million or 1.06%, ultimately settling at $4.71 billion.

Furthermore, the economic team of Pakistan has expressed confidence in the discussions with the International Monetary Fund (IMF). Minister of State for Finance Ali Pervaiz Malik, in an exclusive conversation with Samaa TV, claimed talks were moving in a positive direction.

Highlighting improvements in Pakistan’s economic conditions, Malik noted substantial progress over the past six months to a year. He emphasized that Pakistan’s current economic situation has seen significant enhancement, with a reduced current account deficit of only $100 million in the first quarter, a reflection of the government’s strategy to increase remittances and boost exports.

Malik shared that discussions with the IMF are primarily focused on external financing, and while there have been speculations about a potential mini-budget or an increase in the petroleum levy, he clarified that these are currently premature considerations.

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Positive IMF negotiations propel KSE-100 Index above 94,000 points

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3 days ago

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As a result of investors’ optimism about the reported progress in the continuing talks with the International Monetary Fund (IMF), the Pakistan Stock Exchange (PSX) experienced a robust surge.

The benchmark KSE-100 Index of the PSX, which tracks market sentiment, rose 713 points to a new record high of 94,068 points, breaking above the 94,000-point barrier, as the trading session began.

Early in the day, the stock market began its upward trajectory as the KSE-100 Index steadily rose, gaining 574 points to reach 93,932 points. A possible agreement with the International Monetary Fund (IMF) might lead to more fiscal stability and back Pakistan’s economic reforms, which is why investors are so optimistic about the country’s future.

Officials from the Federal Board of Revenue (FBR) informed the International Monetary Fund (IMF) on Wednesday that the government would not be introducing a mini-budget and would instead continue to aim to collect Rs12,970 billion in taxes each year.

In line with continuing discussions with the Fund, FBR sources revealed that petroleum goods will not be subject to the General Sales Tax (GST).

The fact that Pakistan’s tax-to-GDP ratio has increased from 8.8% to 10.3%, a 1.5% gain viewed as a favorable sign of Pakistan’s fiscal policies, has reportedly pleased the IMF, who has voiced satisfaction at Pakistan’s recent economic performance.

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