Pakistan at risk of losing its financial balance

Pakistan needs strict financial oversight in managing its balance of payments, which has reached at an alarming level. The nuclear-powered South Asian country has barely enough foreign currency to meet only two months’ import bills — a situation that calls for immediate attention.

According to reports, the country might need a $9 billion cash injection by the International Monetary Fund (IMF). Pakistan’s economy faces multiple short- and long-term challenges. Deep-seated structural problems and weak macroeconomic policies have continued to sap the economy’s vigour, IMF said in its assessment of Pakistan economy recently. The country’s financial account has deteriorated due to declining exports and increasing imports, reflecting weak financial inflows and debt repayments. This has led to a decline in the State Bank of Pakistan’s (SBP) foreign exchange reserves to under $10 billion in October 2012, below adequate levels.

Pakistan continues to face difficult macroeconomic challenges as growth remains insufficient, underlying inflation is high, and the external position is weakening. The situation is compounded by an uncertain global environment and a difficult domestic situation, according to IMF. Pakistan government will have to rise above the occasion to tackle the fiscal deficit and run the economy smoothly without overburdening its population. Pakistan is a growing economy and it has a huge potential for growth. The government just needs to pursue prudent macro-economic policy that could help steer the economy out of this short-term crisis.