The Pakistani rupee is constantly devaluated against the US dollar in the domestic market. It has lost almost 3.7% of its value now- to the point that the Pakistani rupee was the worst-performing currency of Asia last year. Moreover, oil prices have increased dramatically by 9% which caused a tumult in the nation. Pakistan’s economy is going through a rough patch and the constant fiscal imbalance is withholding the government to cater to the needs of the growing population. Our external debt is expected to climb up to 103 billion dollars sooner than we think and this may lead to higher external financing needs in the future. The alarming situation is that our foreign exchange reserves are withering away by about a fifth in the past year to reach 13.5 billion US dollars. According to data, foreign exchange reserves held by the State Bank of Pakistan are shortening by 3% each week. CPEC investments could accelerate the build-up of related external payment obligations, deteriorating Pakistan’s capacity to repay at a faster pace.
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The World Bank states that Pakistan’s inflation will remain high till the fiscal year 2021. The current account deficit of Pakistan will surely remain under stress as the trade deficit is predicted to stay at an elevated level this year too and so the macroeconomic situation is in shamble. The spending spree by the outgoing government has pushed the budget deficit to over 7% of the GDP. To overcome this crisis, the present government must try to increase foreign exchange reserves either through an agreement with the IMF or by borrowing from friendly countries. Hence, framing a new trade policy and a planned restructuring of the Federal Board of revenue should be given priority. Moreover, the overbearing influence of the World Bank and other influential donors must be critically re-examined.
According to economist Ahsan Nisar, some of the challenges faced by Pakistan presently include, mounting debt, rising imports and declining exports, excessive taxations and regulations, lack of political consensus, low savings, increased government borrowing, lower investment, and tax collection, shrinking share in world trade, governance and implementation weaknesses, uncertainty due to lack of continuity of policies. Now, what can be done to correct these are to build human capital, innovative use of technology, young labor force to be brought into use, devolution and decentralization, and by improving the energy and security situation.
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