The Ministry of Finance’s claim of attaining a surplus in the current account by the end of the fiscal year has been deemed “unrealistic” by the Pakistan Business Council (PBC). The council projects a current account deficit of $4 billion, which contradicts the government’s estimate of a surplus of $3 billion.
The PBC, which represents Pakistan’s corporate and business sectors, compared the Ministry of Finance’s estimates with the actual balance of trade and remittance figures for the period of July-December 2022. The data revealed that the current account had already reached a deficit of $3.2 billion by the end of the first half of the fiscal year and is expected to close at a $4 billion deficit by the end of the current fiscal year.
Furthermore, the council stated that the government will not be able to reduce its import bill to the target of $55.5 billion in the fiscal year and predicts it will reach $60.5 billion instead. The council attributed this to the unrealistic prediction of Hajj and fuel imports and warned that cutting an additional $15 billion in the already depleted first half would result in intolerable levels of unemployment.
However, the PBC expressed optimism about the country’s exports, stating that the government’s target of reaching $29 billion by the end of the fiscal year is “realistic due to compression of global demand”. As of July-December 2022, Pakistan’s exports had reached $17.8 billion.
The balance of trade is expected to reach a deficit of $31.5 billion in the fiscal year, $5 billion higher than the government’s prediction of $26.5 billion. In regards to remittances, the PBC found the government’s prediction of collecting $29.5 billion in inflows in the fiscal year to be “unrealistic by about $2 billion” and predicted it will settle at $27.5 billion.
Pakistan is currently facing a financial crisis, with policymakers seeking additional funds to cope with the consequences of a recent flood disaster. The authorities in Islamabad and the International Monetary Fund (IMF) are also in the process of reviewing the 9th review of the Extended Fund Facility. As foreign exchange reserves continue to deplete, experts have called for a swift revival of the IMF program.
