Pakistan’s forex reserves to increase by $10 billion in June

In the midst of pressing economic concerns, Finance Minister Muhammad Aurangzeb shared a glimpse of optimism, predicting that Pakistan’s foreign exchange reserves are poised to reach $10 billion by June of this year. Speaking at the 2024 Islamabad Business Summit, Aurangzeb emphasized the necessity for reforms in the energy sector, particularly stressing the imperative of privatizing struggling enterprises.

Regarding the possibility of seeking assistance from the International Monetary Fund (IMF), Aurangzeb characterized it as a critical step, noting that engaging with the IMF is often a country’s last resort. This statement comes following Pakistan’s formal request to the IMF for a new bailout package ranging between $6 to $8 billion under the Extended Fund Facility (EFF), with potential augmentation through climate financing.

In an interview with The National, Aurangzeb highlighted the IMF’s receptiveness towards considering a larger, longer-term program, though specifics regarding size and duration will be determined in May 2024. Pakistan has also expressed interest in hosting an IMF review mission in May to solidify details of the proposed three-year bailout package under the EFF program.

However, despite the government’s optimistic narrative, the IMF’s latest Regional Economic Outlook (REO) cautioned that Pakistan’s external buffers have weakened, primarily due to ongoing debt servicing, including Eurobond repayments.

Aurangzeb projected a GDP growth of 2.6% for FY2024, underlining the government’s efforts to attract foreign investment and maintain reasonable limits on current account and fiscal deficits. He noted a reduction in inflation, attributing it to increased tax collection initiatives and a decrease in the current account deficit.

Furthermore, Aurangzeb pointed out positive developments in the trade sector, with a significant reduction in the trade deficit to $17 billion, and highlighted the agriculture sector’s growth rate of 5%. He also commended the Federal Bureau of Revenue (FBR) for achieving a substantial 30.2% increase in tax collection, surpassing its target during the current fiscal year.