SBP painted an overly optimistic analysis of the economy, say experts

Karachi: Analysts have doubted the overly optimistic analysis by State Bank of Pakistan about the country’s economy considering recent global oil prices increases, falling forex reserves and exports.

According to JS Research analyst Syed Atif Zafar criticized SBP for its failure to address concerns at the external front, although he agreed with the central bank’s prediction of economic growth clocking at 6pc for FY 2017-18, reported a local newspaper.

He chided about SBP’s underestimating of the recent rise in global oil prices, lack of foreign inflows, pressure on PKR and exports etc. In last few months, global oil prices have risen significantly and have been trading at $51.5 per barrel.

For Pakistan, increase in global oil prices represents considerable threats, firstly a whopping surge in import bill and the rise in consumption of POL products in last few years would contribute to oil imports also rising and hurting the economy.

Balance of payment crisis is another situation that could realistically arise due to lack of dollar denominated sources of income. In the not so foreseeable future, Pakistan will have to payback record high foreign loans, which includes those obtained from China for CPEC projects.

The economist Dr Ashfaque Hasan Khan predicted a widening of the current account deficit due to balance of payment crisis by March-April 2018, which he thinks may force Pakistan to seek another IMF bailout.

He added that current account deficit would touch S16-16.5b in FY 2017-18, with $7-7.75b being required for debt servicing.

Zafar added the central bank may have to increase policy rates earlier than anticipated and also begin the gradual depreciation of the PKR to issues arising in the country’s economy.

 

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