ISLAMABAD: State Minister Finance and Economic Affairs Rana Afzal Khan claims the country has suddenly started showing all positive financial indicators, which will help the government to overcome the pressure of financial gap. However, he also indicated that the government may go for another bond arrangement to avoid fall in foreign currency reserves.
“High rate of imports is not worrisome since it shows the purchasing power of individuals or organisations in the country. With the fall in the value of rupee, the imports have started showing decline against the increasing exports. The number of opening of LCs has reduced,” the minister claimed while exclusively talking to Pakistan Today at his office on Thursday.
“We will be handing over healthy levels of foreign exchange reserves to the next government. We are exploring options to get dollar inflows from all possible avenues in months ahead,” he said while replying to a query about how the next government will handle challenges of the balance of payment. He, however, said short-term arrangements maybe explored for supporting the balance of payments during the remaining term of the government. He claimed the government was well in position to meet all the debt and other liabilities in the remaining months of this financial year.
Talking about difficult decisions of the government, Rana Afzal said, saying no to Saudi Arabia in the Yemen War was a difficult decision but the Arab country has realised the wise decision of the country. Both the countries are working on strengthening economic ties. “Taking other bold steps, the government is now moving forward for establishing banking channel with Iran. We see $ 1.5 billion to $ 2 billion export to the neighbouring country after the currency exchange arrangements for which a committee has been formed,” he said.
A reliable source at the ministry told Pakistan Today that with the resumption of Paris Club repayments and meeting other foreign liabilities, Pakistan is considering launching another Eurobond worth $ 1 billion in next two to three months to support falling reserves.
Pakistan’s debt servicing requirements on external front stood at $ 6 billion for the whole financial year out of which $ 2.4 billion were already repaid while the remaining $ 3.6 billion have to be paid back in next six months (January-June) period of 2018.
According to the source, the ministry is projecting the estimated external repayments to be less than $ 6 billion over next 12 months from January to December 2018. One of the bulk repayments is expected to become due in late January 2018, said the source.
Secondly, the gross financing need for the year 2018 is not as high as reported in the media. As per international standards, a country’s gross financing need is an aggregate of current account deficit plus debt servicing of the year.
According to a recently issued statement of the ministry of finance, based on this internationally recognised accounting standard, Pakistan’s gross financing need for 2017-18 is estimated at $ 17-18 billion, 5 to 5.3 per cent of GDP. It said arrangements are in place to meet the gross external financing need of the country. These arrangements include government official inflows from multilateral and bilateral sources, Sukuk/Euro bonds, privatisation proceeds, foreign direct investment, private capital inflows and commercial financing, if necessary. After accounting for these arrangements, the net financing gap that the country faces this year is estimated to be in the range of $ 2-2.5 billion.
