Pakistan’s Finance Minister Muhammad Aurangzeb has provided a glimmer of hope for the country’s economy, stating that foreign exchange reserves are expected to reach $10 billion by June this year. This positive outlook comes amidst the government’s ongoing efforts to address the dire economic conditions prevailing in the country.
Stressing the need for reforms, Aurangzeb emphasized the importance of privatizing loss-making enterprises, particularly in the energy sector. He also acknowledged the significance of the International Monetary Fund (IMF) in assisting Pakistan’s economic recovery, calling it a “last option” for the country.
Pakistan has formally requested a new bailout package from the IMF under the Extended Fund Facility (EFF), with the possibility of augmentation through climate financing. The Finance Minister expressed confidence that the IMF has been receptive to the request, with the exact size and time-frame of the package to be determined after consensus is reached on the major contours of the program in May 2024.
Despite the government’s optimistic outlook, the IMF has highlighted in its latest Regional Economic Outlook (REO) that Pakistan’s external buffers have deteriorated due to ongoing debt service and Eurobond repayments. However, the government remains committed to its efforts to control inflation and reduce deficits.
The gross domestic product (GDP) growth is projected to be at 2.6% in FY2024, according to the minister. The government has also set targets to keep the current account and fiscal deficits within reasonable limits. Tax collection has increased, and there has been a reduction in the current account deficit (CAD).
The CAD has been reduced to $1 billion after a 74% reduction in FY24, and inflation is expected to remain at 24% during the ongoing fiscal year. The trade deficit has also been slashed to $17 billion after a 24.9% reduction. The finance minister noted that the Pakistan stock market is at the highest level in history and that the agriculture sector is experiencing a 5% growth rate.
