Pakistan to face continued foreign exchange challenges with reforms absence: World Bank

April 04, 2024 (MLN): In the absence of major and sustained economic reforms, Pakistan is expected to continue to face foreign exchange liquidity issues due to the persistent trade deficit and limited access to external financing, especially from the private sector, according to the World Bank’s latest Pakistan development update.

Even with the recent successful completion of the IMF-SBA40 and continued rollovers, reserves are projected to remain low, hovering around 1.3 months of total imports over FY24–26.

Import management measures are expected to continue disrupting domestic supply chains, while tight macroeconomic policies will mute aggregate consumption and investment.

In the absence of a credible and ambitious economic reform agenda, uncertainty is expected to linger, affecting confidence and growth.

It was highlighted that Pakistan has sizeable upcoming domestic and external payments in the near to medium term.

With limited fiscal space and foreign reserves amounting to only $9.1 billion at end-February 2024 (equivalent to 1.7 months of FY25 imports), any delays in the disbursement of planned external financing could pose substantial liquidity risks.

Moreover, the capacity to meet the high gross and external financing needs depends heavily on achieving necessary fiscal consolidation, the materialization of expected rollovers of regional bilateral loans and deposits and refinancing of commercial loans.

Copyright Mettis Link News