After a prolonged period of uncertainty and decline, Pakistan’s economy has received a significant boost. The International Monetary Fund (IMF) has approved a much-needed $3 billion bailout package for Pakistan, a crucial move to prevent the country from defaulting on its debt repayments. These funds would be released over nine months, with an initial disbursement of approximately $1.2 billion. The positive impact of the anticipated approval was already evident following the conclusion of a staff-level agreement between the IMF and Pakistan late last month.
The economic climate showed signs of improvement when the Pakistan Stock Exchange (PSX) reopened after the Eid-ul-Azha holidays on 3 July 2023. Within a short period, the KSE-100 benchmark index surged past 2,400 points, prompting a temporary suspension of trading for an hour after reaching its upper circuit limit of 5 per cent around 9:30 am. The market has continued to perform well since then.
The agreement with the IMF paved the way for the receipt of crucial support from other countries who were awaiting this outcome. Shortly after the staff agreement was finalised, Pakistan received an important transaction from Saudi Arabia. “State Bank of Pakistan (SBP) has received [a] deposit of $2 billion from the Kingdom of Saudi Arabia. This inflow has increased the forex reserves held by SBP and will accordingly be reflected in the forex reserves for the week ending July 14 July,” Pakistan’s Minister of Finance Ishaq Dar announced on Twitter.
The next day, United Arab Emirates (UAE) disbursed a fresh loan of $1 billion further strengthening the country’s foreign exchange reserves at the central bank, which had touched critically low levels in recent weeks.
The military’s involvement in this initiative serves as a pivotal force for implementing necessary steps to attract investments regardless of the political situation.
With economic certainty returning, the business community anticipates that Pakistan’s stock market will begin performing in alignment with its true value. Previously, the market was undervalued and did not reflect its fundamentals accurately.
When the Pakistan Democratic Movement (PDM) assumed the government from Pakistan Tehreek-e-Insaf (PTI) in April 2022, the country was on the verge of default. It took some time for the current administration to curtail the damage done to the economy during the PTI’s tenure. Acknowledging the extent of this damage, the government formulated a comprehensive roadmap for economic recovery, prioritising genuine solutions over temporary fixes.
A significant step towards economic revival is the establishment of a Special Investment Facilitation Council (SIFC) in coordination with the military.
“Employing a whole-of-the-the-government approach, the coalition government has decided to set up a Special Investment Facilitation Council (SIFC) with a mandate to frame economic policies that ensure policy predictability, continuity & effective implementation to revive the economy,” Prime Minister Shehbaz Sharif said on Twitter.
The successful civil-military coordination in meeting the Financial Action Task Force (FATF) targets and getting Pakistan out of its grey list last year demonstrated that bureaucratic hurdles can be overcome through effective coordination at the highest level of the state. That strategy is now being employed for Pakistan’s economic recovery and prosperity.
According to a government press release, “The plan envisages capitalising Pakistan’s untapped potential in key sectors of defence production, agricultural / livestock, minerals/mining, IT and energy, through indigenous development as well as investments from friendly countries. To fast-track the development of projects, the establishment of [a] Special Investment Facilitation Council has been undertaken to act as a ‘single window’ interface for…potential investors.”
Previously, foreign investors faced a cumbersome process involving multiple layers of checks and approvals that could extend for months, if not years, before they could establish a business in Pakistan. However, with the introduction of the SIFC, investors can now benefit from a streamlined approach. The SIFC functions as a dedicated help desk, eliminating the need for investors to navigate through various government offices. Instead, they can receive prompt responses and necessary approvals more efficiently.
SIFC comprises an apex committee, an executive committee, and an implementation committee, with the chief of army staff (COAS) would be a member of its apex committee. The press release states that the COAS assured “the Pakistan Army’s all-out support to complement government’s efforts for economic revival plan.”
The military’s involvement in this initiative serves as a pivotal force for implementing necessary steps to attract investments regardless of the political situation.
It is the nature of Pakistan’s politics that governments often avoid taking tough economic decisions in the election year for fear of losing votes. It has been a rough year and a half for the PDM government since coming to power, but it did not hesitate to take hard decisions for the sake of the country.
While challenges persist, the government’s commitment to the country’s long-term prosperity bodes well for sustainable growth. The successful implementation of these initiatives and continued cooperation between various stakeholders will be essential in ensuring a robust and resilient economy.
The writer is a corporate financial specialist.
