CHI - The economic initiatives announced by the United States under US-Pak strategic dialogue program for the sectors of energy, transport, trade and for the social safety nets, are expected to bring a needed amount of external financial inflow to the country, which would ease the liquidity pressure that the economy facing and also boost the confidence of local and foreign investors on the capital market.
However, any delay in the pledged amount even in the absence of IMF credit, coupled with low prospects of financial inflows from the other multilateral lending institutions, might put economy at risk and create debt turmoil for the government since the beginning of new calendar year.
The said incentives are subject to the US Congress approval and it is assumed that the bill, containing the deliberations indicated in the US-Pak strategic dialogue, will be tabled soon in the Congress to become this document a law by the US legislators. Therefore, according to Chief Economist SCB, the country is likely to start receiving financial inflow under this program by the end of this year.
Talking to The Nation on Thursday, Chief Economist Standard Charted Bank Sayem Ali said that the announcement of the proposed measures by the US to strengthen the economic ties and cooperation between the both countries is a very positive sign for the medium-term sustainability and outlook of the Pakistans economy, which is heavily relaying on external financing.
He further said that the countrys economy is being confronted by liquidity crunch caused by governments high borrowings from the central bank and commercial banks for budgetary support and commodity operations, affecting the growth of money supply and cash flow in the foreign exchange and money markets.
It is important to mention here that the government from January 01 to March 06, 2010 has borrowed Rs130 billion from the banking system to finance inflationary related spending.
Deficit financing and Debt servicing will remain the major concern for the government if the external inflows are not materialized timely especially in the situation whereby tax revenue is still below the desired requirement. A certain amount has been allocated for the energy sector but it is surprising that no particular amount earmarked for the transport sector, Ali said.
It may be mentioned that the United States has already committed to $7.5b in aid over five years in a Kerry-Lugar Bill law approved last year. However, since then no single dollar has been come to Pakistan from the US except Coalition Support Fund that is all about security spending and financing.
Meanwhile ex-President KCCI and renowned industrialist Majid Aziz said through this dialogue the US has acknowledged the changing geo-political, strategic and economic role of Pakistan in the regions of South and Central Asia. It also agreed that without having a proper energy management, Pakistans economy can not progress.
I hope that the Congress would pass the Reconstruction Opportunity Zone Bill soon, said Aziz.
About the proposal of giving market access of US to Pakistani exporters, Aziz said US trade dynamics are different from Pakistans trade perspectives, I do not foresee the united Sates would give its market access facility to Pakistan in the near term as the trade union lobby in US is very strong, which would oppose this move.