Pakistan economic woos increased by fiscal deficits, flawed monetary policy

Pakistan economic woos has been increased by huge fiscal deficits and failure in implementing robust monetary policy thereby unable to negate its external debt obligation coupled with depleted international reserves.

Misaligned economic policies of the past, including large fiscal deficits, loose monetary policy and defence of an overvalued exchange rate, fuelled consumption and short-term growth but steadily eroded macroeconomic buffers, increased external debt, inflated current account deficit and depleted international reserves, according to Business Recorder.

The current account deficit was recorded at a historic high of USD 19.2 billion during 2017-18 and the external account improved significantly during the tenure of the present government.

It is unfortunate that the basis of that Pakistan optimism has gradually eroded as for the current year (July 21 to June 30, 2022) the current account deficit is expected to be over USD 10 billion. The External Debt Sustainability issue is therefore required to be examined within the revised paradigm, according to Business Recorder.

Further, the 2020-2021 Pakistan Economic Survey states about the External Debt Sustainability as it can meet its current and future debt service obligations in a timely manner without exceptional financial assistance.

Pakistan's external debt is around USD 127 billion out of which a substantial sum is due for principal payment in the next five years.

Earlier, in 2019-20, the Current Account Deficit (CAD) stood at USD 4.4 billion and the lower CAD significantly reduced the country's need to arrange external financing.

However, unless and until fundamental structuring is done in the business model the entity (Pakistan) will remain in dire financial straits, according to Business Recorder.

( With inputs from ANI )

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