Economy Set To Stage A Rebound

Pakistan economy is expected to stage a rebound during the financial year 2023-24 after the change of guards in power corridors following general elections scheduled to be held later this year, experts say.

Analysts, economists and executives said economy will be a major beneficiary of the general elections and the new government will adopt concrete measures to revive key sectors, negotiate a long-term deal with the International Monetary Fund (IMF) and attract foreign direct investment into the country.

They are of the opinion that political stability will help stabilise the rupee, resume economic activities and generate job opportunities in the country, however it will be a challenging task to contain inflation, reduce interest rates and rationalize electricity and gas tariffs to provide a much-needed breather to the industry and people.

Pakistan’s economy experienced a turbulent year as the existing economic imbalances were compounded by the unfavorable external environment. The domestic headwinds including the twin deficits, high inflation, catastrophic flooding, delay in the completion of IMF programme reviews as well as the global challenges such as fast paced increase in commodity prices and monetary tightening by major central banks in advanced economies.

IMPROVING LIQUIDITY

Referring to the latest announcement from Fitch Ratings, which upgraded Pakistan’s long term rating foreign currency rating to CCC, experts said the upgrade reflects the country’s improved external liquidity and funding conditions followings its staff level agreement with IMF on $3 billion stand-by agreement.

Under the nine-month deal, Pakistan received $1.2 billion in July and the remaining $1.8 billion will be disbursed only after successful reviews in November and February 2024. The IMF’s short-term facility has unlocked external financing as the Saudi Arabia and the UAE also provided $2 billion and $1 billion financial assistance to the country, respectively.

“The authorities also expect $3-5 billion in new multilateral funding while stand-by agreement should facilitate disbursement of up to the $10 billion in aid pledges committed at the January 2023 flood relief conference in Geneva,” according to the Fitch Ratings.

Overall, the government expects $25 billion in gross external financing during the financial year 2023-24 that will help avoid default on external liabilities and ensure timely payment of $15 billion in public debt maturities, including $1 billion in bonds and $3.6 billion to multilateral creditors.

Economic experts said Special Investment Facilitation Council (SIFC) is a step in right direction and will provide an impetus to the government efforts for economic revival. The council, chaired by the Prime Minister and comprising the Army chief and federal ministers, will be primarily focusing on GCC countries to attract investment in defence, agriculture, minerals, IT and energy sectors.

The newly established council would instill confidence in foreign investors and provide them with the necessary support and facilitation to conduct business in Pakistan. Pakistan currently receives an annual influx of $1.5 billion in foreign investments.

Unsal Erdogan, country manager for Turkey at Marks & Spencer Group, said International fashion retailer is looking for enhancing imports of textile products from Pakistan. The group will import woven garments, denim, socks, towels, graphic design T-shirts and Polo Shirts etc, from Pakistan. Marks & Spencer team will visit Pakistan in September to interact with All Pakistan Textile Mills Association (Aptma) member mills,” Erdogan said at a meeting with Aptma members.

Samiullah Tariq, head of research and development at Pakistan Kuwait Investment Company, said economy is expected to stabilise next year as the new government is expected to introduce long-term policy measures to revive various economic sectors.

“The gross domestic product growth rate is expected to improve from 0.29 per cent in 2022-23. However, it will be a challenge to bring down inflation from 29 per cent in 2022-23 to 22 per cent in financial year 2023-24,” Tariq said.

“Inflation is expected to be moderate and will come down gradually,” he said.

In reply to a question about the rupee, he said the currency will be stable at present levels if the government successfully reduces the gap between interbank and open markets.

“The rupee won’t go down further due to low base. In my view, the government would restrict the gap between interbank and open markets, but the higher interest rates and the currency depreciation will remain serious challenges to the remittances growth in coming years,” he said.

— muzaffarrizvi@khaleejtimes.com

• Supplements