The IMF on Thursday called on Pakistan’s new government to act fast to stabilize its teetering economy, warning that growth will likely slow and inflation rise, but made no mention of a new bailout deal.
Pakistani Prime Minister Imran Khan’s new administration had vowed to decide by the end of last month if it would seek an IMF bailout to shore up the economy as it faces a balance-of-payments crisis and dwindling reserves.
However, it has yet to announce a deal as its seeks other arenas of financing, and launched a highly publicized austerity drive that has included auctioning off government-owned luxury automobiles and buffaloes.
Pakistan is in need of significant external financing in the near term, the IMF said in a statement, recommending raising gas and power tariffs, while also pushing for exchange rate “flexibility” and monetary policy tightening.
“These steps would help reduce current account pressures and improve debt sustainability,” the fund said.
However, it warned that tough days might lie ahead, as higher oil prices and tightening financial conditions for emerging markets would likely add to Pakistan’s economic woes.
“In this environment, economic growth will likely slow significantly, and inflation will rise,” the IMF said.
Pakistan has gone to the IMF repeatedly since the late 1980s. The last time was in 2013, when Islamabad accepted a US$6.6 billion loan to tackle a similar crisis.
For months, analysts have warned that Khan’s new government must act quickly to stem a new current-account crisis, which could undermine the nation’s currency and its ability to repay billions in debts or purchase imports.
The US, one of the IMF’s biggest donors, has raised fears that Pakistan could use any bailout money to repay mounting loans from China, sparking criticism from Islamabad.
Pakistan’s budget deficit has climbed steadily over the past five years, while foreign currency reserves have declined. The rupee has been repeatedly devalued in the past year, fueling inflation.
Khan, who took office in August, has vowed to improve trade with India, increase the ease of doing business and boost tax collection, but is yet to roll out a comprehensive plan aimed at tackling the country’s economic fortunes.
The state of Pakistan’s finances could also undermine one of Khan’s most popular promises to construct an “Islamic welfare state” based on increased spending on education and health.
The IMF’s warnings came days after the Asian Development Bank said that Pakistan’s economy could shrink by 1 percent in the current fiscal year.
NOT ALL GOOD: Analysts warned that other data for last month might be less rosy due to the virus and analysts expect the PMI to contract again next month Chinese factory activity saw surprise growth last month as businesses went back to work following a lengthy shutdown, but analysts said that the economy faces a challenging recovery as external demand has been devastated by the COVID-19 pandemic, while the World Bank said that growth could screech to a halt. China is slowly returning to life after months of tough restrictions aimed at containing the virus, which put millions of people into virtual house arrest and brought economic activity to a near standstill. The strict measures saw a closely watched gauge of manufacturing plunge to its lowest level on record in February,
ALL ABOUT STRATEGY: The company is optimistic, saying that its gross margin should increase year-on-year, but it is scaling back on its plans to expand capacity Quang Viet Enterprise Co (QVE, 廣越), which makes down jackets and garments for sportswear and outdoor brands including Adidas AG, yesterday said that revenue might drop 5 to 10 percent annually this year as some customers trimmed orders in response to the COVID-19 pandemic. That would mark its first revenue decline since 2016. Quang Viet posted record-high revenue of NT$16.26 billion (US$537.45 million) last year, up 22 percent from 2018. Down jackets made up 40 percent of it revenue last year. North Face Inc and Patagonia Inc are this year likely to reduce orders by 20 to 30 percent from a
ELECTRONICS Lite-On delays sale of unit Lite-On Technology Corp (光寶科技) yesterday said it would postpone the sale of its solid-state drives (SSD) business to Kioxia Holdings Corp, formerly known as Toshiba Memory Holdings Corp, due to disruptions amid the COVID-19 pandemic. Last year, the Taiwan-based electronics components supplier struck the deal with the Japanese firm, agreeing to sell the unit for US$165 million. Citing unfinished integration work due to the pandemic, Lite-On has deferred today’s closing date until further notice, adding that the delay would not have a negative effect on the unit’s operations. AUTO PARTS Hiroca approves dividend Automotive interior parts supplier Hiroca
Taipei 101, one of the nation’s leading shopping centers, is planning to reduce its business hours due to decreased demand amid the COVID-19 pandemic. Taipei 101 is to open daily at noon and close at 9pm from April 6, building management said in a statement on Monday. The shopping center has been opening at 11am and closing at 9:30pm from Sunday to Thursday, while closing at 10pm on Friday and Saturday. The restaurants in the food court — on the basement level — would adjust their business hours as necessary, but the supermarket would continue to open at 9am daily, management said. The shopping