Economic Package hangs in the balance

Economic Package hangs in the balance

(By SHAHBAZ RANA The Nation)  

ISLAMABAD - Much-trumpeted Economic Stabilization Package is hanging in the balance due to persistent security dilemma and its failure will lead to drastic steps including compression of imports and restricted capital out flight.
The government on last Friday announced multi-pronged Economic Stabilization Package with the aim of healing sinking economy. Out of four pillars, its two columns are jolting due to security uncertainty in the country, which peaked on Saturday with suicide attack on the Marriott International Hotel, located a few hundred yards away from the Parliament and the Presidency.
So much so, there were reports that the visiting team of International Monetary Fund excluding its head, Juan Carlos Di Tata who was still in Islamabad, left Pakistan on security grounds, which was earlier scheduled to depart on Wednesday.
However, a top official of the Finance Ministry said the team went back as per schedule. The team was here to give its evaluation on current economic situation and the top official said the IMF submitted its brief report, which found everything normal with Pakistan economic package.
Financing widening current account deficit - the most important element of the package, the government is eying on attracting foreign investment. According to the plan, the government would privatize the oil, gas and power sectors on a fast track basis. The government wants to bridge budget deficit by issuing government commercial papers and Pakistan Investment Bonds - the second significant point.
Background interviews with key officials of Finance Ministry, international donor agencies and independent economists reveal that chances of success of the economic recovery plan are dimmed if the country remained engulfed in civil war like situation for a couple of more months.
Pakistan is in need of at least US $ 3 to 4 billion to meet the current account obligations. Foreign currency reserves with State Bank of Pakistan are not enough to finance even more than two months imports. Total foreign exchange reserves stand at US $ 8.912 billon, out of which the Central Bank is possessing about US $ 5.5 billion.
Despite approaching key world capitals, the government could only muster US $ 500 million from Asian Development Bank, which is likely to be transferred to the government on September 30. The worrisome element is capital out flight, which is going on at US $ 250-300 million per week.
Thin reserves position and uncertainty are also causing depreciation in Pak rupee value against the American currency. On Monday, the first working day after Saturday deadly attack, dollar against rupee touched new peak of Rs 78.30 = 1 $. Such depreciation also keeps foreign investors at a bay due to loss in currency value.
Planning Commission Chief Economist, Dr Rashid Amjad still believes the foreign investment will keep on coming in because Pakistan offers high rate of returns, which induces foreign investors to invest despite concerns. He also pinned high hopes from friends of Pakistan to come forward and help out.