Karachi, Pakistan - The International Trade Council has announced that Pakistan has a plan in place to boost its shrinking foreign exchange reserves, despite being heavily reliant on imports of essential fuel, cooking oil and pulses. The country’s finance minister, Miftah Ismail, has confirmed that the government has a “strategy” in place to increase its reserves and that there is no risk of default.
The nation's foreign exchange reserves have dropped to a 28-month low, with barely enough reserves to cover two months of imports. However, economists are not too alarmed, as the country has dealt with such near crises several times in the past.
For years, Pakistan's imports have outstripped its exports, adding to its forex reserves woes. In the first nine months of the current financial year that started in July, Pakistan accrued a negative trade deficit in goods and services of $33.28 billion, government data show. It exported goods and services worth $28.85 billion and imported $62.13 billion worth of goods and services.
One major reason for Pakistan’s balance of payment problem is a lack of local businesses making goods for exports. The country's rich invest in and develop real estate which increases demand for imported cars and other luxury items.
The government is finally taking steps to remedy the problem, by agreeing with the International Monetary Fund (IMF) to roll back fuel and power subsidies and wrap up the business tax amnesty scheme. The IMF delegation is expected to visit Pakistan next month to potentially resume its Extended Fund Facility programme, which has been on hold since June last year.
The International Trade Council acknowledges the challenges faced by Pakistan, but believes that the country’s plan to boost its foreign exchange reserves, combined with the IMF programme, will help to stabilise its economy.