- Opportunities and challenges in 2019
In October came the Saudi aid package, $6 billion divided into a $3 billion deposit directly with SBP as balance of payments support, and another$3 billion through deferred payment on oil imports from the country. It was followed in December by a similar $6b package from UAE, half deposits, half deferred payment. Reportedly Imran Khan has sought $4 billion worth LNG on credit, along with the extension of deferred payment for one year at reduced price. He is understood to have asked the Qatari government to give concessional loan like Saudi Arabia and UAE to boost the country’s foreign exchange reserves. The matter of exporting labour to Qatar was also supposed to have come under discussion.The immediate impact of the inflows of foreign currency from Saudi Arabia and UAE had led to the stabilisation of the foreign exchange reserves, cooling of pressure on financial markets and addressing the immediate concerns on balance of payment. The packages have acted as a much needed pain killer providing a short term relief.
What must not be forgotten is that inflows from friendly countries are not a permanent solution to Pakistan’s economic woes. These have only given the government time to improve the economy in 2019 through reforms that require both ingenuity and political will.
The government has a tough agenda ahead. Two factors will play crucial role in determining the future of the economy. First, the capacity on the part of the government to raise revenues. It remains to be seen if the government is able to expand the tax base through a better tax policy accompanied by effective administrative actions. Second, whether it can mobilise local investors for without their participation foreign businessmen will remain shy of bringing capital into Pakistan. Only significant fresh doses of investment can help the economy to grow and play role in job creation on the scale promised by the PTI.
Political stability would be of crucial importance in 2019 as this can provide the all important enabling environment for investment. Imran Khan will have to undertake actions centered around developing working relations with the opposition that he has so far abstained from. Unless this is done the prevailing uncertainty will take its toll on the economy.