Former governor of the State Bank of Pakistan (SBP) Dr Reza Baqir has said the incoming government would need to initiate negotiations with the International Monetary Fund (IMF), and control inflation.
“Pakistan has significant economic challenges, one of them is how sustainable is its debt. Pakistan does not have access to capital markets, and one of the key priorities for any government that is elected is going to be how to restore confidence in its economy,” he said while talking to Bloomberg Tv.
The remarks come as Pakistan conducts General Elections with cellular services suspended amid what the interior ministry called ‘security concerns’.
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Baqir noted that the challenges for the incoming government would be its negotiations with the IMF, and controlling skyrocket inflation.
“I think the number one challenge is going to be how to put the economy on a sustainable footing and how to manage to relationship with the IMF,” said the former SBP governor, who termed the IMF-Pakistan history as an “unhappy marriage”.
On projections, Baqir said that the inflation level in the coming twelve months would depend on the pace of economic confidence restoration.
“How quickly also the IMF deal is put through, because the earlier that is done, the earlier people will have confidence and the currency would continue to stabilise.”
Baqir said Pakistan remains dependent on the Washington-based lender “ at least for now“ as “it needs the IMF’s seal of good housekeeping if it is to continue to borrow from China and the Middle East”.
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Baqir, Managing Director with Alvarez & Marsal, shared over the next five years Pakistan has to repay $7 billion to the IMF, whereas its current external reserves stand at $8 billion. “So where is Pakistan going to get this money, unless it gets new money from the IMF to repay the old money that had gone from the IMF part?”
Pakistan is currently under a $3-billion Stand-By Arrangement (SBA), which is scheduled to expire in March-April.