Friends of Pakistan last hope in economic crunch

By Mehtab Haider
ISLAMABAD: President Asif Ali Zardari will ask the US, the UK, Saudi Arabia and other important world economies for pledging a breathing fiscal space by extending $3 to $5 billion aid to rescue Pakistan’s economy amid growing concerns of default on foreign debt obligations, The News has learnt.

The US administration, along with the UK and Pakistan’s President Asif Ali Zardari, is co-hosting the Friends of Pakistan Conference tomorrow (Friday) in New York where Islamabad expects pledges of billions of dollars from G-8 and other countries to rescue its ailing economy as the foreign currency reserves deplete rapidly, touching the lowest of $8.467 billion on September 23, 2008.

“The foreign currency reserves held by the State Bank of Pakistan fell below $5.006 billion and if forward liabilities are included, the real reserves are hovering around $3 billion, which cannot meet the import bill of one whole month,” official sources, while talking to The News here on Wednesday, quoted the latest data of the central bank.

Out of total reserves of $8.467 billion, the reserves held by the commercial banks stood at $3.461 billion on September 23, 2008. From September 22, 2008, the reserves fell by around $180 million, as there were no receipts while the government made heavy payments in inter-bank for oil import bill and for Hajj operation, etc.

Moody’s Investors Service lowered Pakistan’s credit outlook to negative on Tuesday due to the risk of “missed repayments” on the nation’s debt.

“If Pakistan does not get the desired results from the Friends of Pakistan forum, which will be held tomorrow, bad days will be really knocking at the doors of the national economy,” said the official sources.

When a high-level official in the Finance Ministry was contacted to know about expectations of Islamabad from the Friends of Pakistan forum, he said that Pakistan had taken all corrective measures for putting its house in order by announcing four-point macro-economic stabilization programme for putting things on the right track.

The falling reserves are major concern for the economic managers as the Paris Club rescheduling related loan has also matured and interest payments on bilateral loans as well as Euro bond payment would consume large amount in the range of $3.5 billion during the current fiscal year.

The falling reserves have put pressure on rupee against the dollar, shedding 24 per cent against the dollar in the last few months. The depreciation of the rupee, coupled with hike in inflationary pressures, is playing havoc with the life of the common Pakistanis as purchasing power has eroded on a fast pace, something which was never witnessed in the history of the country.

“Our short-term difficulties can be overcome if the Friends of Pakistan come forward by pledging dollar inflows even in shape of loans or the Saudi Oil Facility on deferred payments,” said the official sources, pinning high hopes that Saudi Arabia was likely to announce good news for Pakistan’s economy in this upcoming forum.
Source: The News, Thursday, September 25, 2008


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