The State Bank of Pakistan expressed optimism about the economic progress of the country last week, but independent economists believe the recent increase in oil prices in the international market, depleting foreign exchange reserves and pressures on the government to devalue rupee could pose serious threats to the national economy. The bank, in its report last week, had expressed the hope that the government would achieve the growth target of 6 percent in the fiscal year 2018.The State Bank has maintained the key interest rate at 5.75 percent for the next two months on the ground that inflation will remain below 6 percent during the current fiscal year. However, economists agree that the country would achieve 5.6 percent growth in the Gross Domestic Product (GDP) during the current fiscal year but growing concerns about the external account also need to be resolved. The oil prices in the international market have increased by $10 per barrel to stay at $51.5 per barrel, putting pressure on the countries like Pakistan.The government has already increased oil prices, giving a severe blow not only to the general public but also to the industry. There is already a meagre attraction for foreign investment in the country due to lack of trust in the government policies.
The increase in oil prices will increase the import bill of Pakistan where the dependence on oil has tremendously gone up due to car purchasing spree in the country. Economists fear that increase in the oil import bill will also have its share of pressure on the balance of payment problem. The country is already seeking loans from the international donor agencies for debt servicing and so far failed to generate income to pay the foreign loans. It is feared that the current account deficit will appear in the form of crisis during the third quarter of the current fiscal year and the government may be forced to re-negotiate a bailout package with the IMF.
On the political front, the government and the opposition parties are fighting for their survival and are least concerned about the economy of the country. According to an estimate, the current account deficit will reach $16-16.5 billion during the current fiscal year and at least $7-7.5 billion will be required for debt servicing in a situation where foreign exchange reserves are below $14 billion. It is time that all the stakeholders should sit together to find a solution to a crisis like situation facing the economy.