This refers to an article titled "Economy's woes" carried by Business Recorder on November 25. In the article, the author discussed sharp decline in FDI on the basis of data of first quarter of current fiscal year. He has stated that FDI witnessed a sharp decline of 24 percent during first quarter of the CFY which is lowest in a decade.
This statement seems confused and incorrect as the FDI remained at $216.2 million during first quarter (July-September) of CFY16 against $200.7 million of last fiscal year showing an increase of 7.7 percent. It shows unawareness of the facts on part of the author.
He has further stated that main reason of decline in FDI is that strategic foreign investors not taking Pakistan as an attractive market. It is for the information of the author to first look at the international perspective about Pakistan. Foreign investors' fears about the investment climate have largely dissipated due to improved law and order outlook on the economic and political front in the country. The CPEC is a big example for writer's information. Going forward international rating agencies have upgraded outlook for Pakistan's economy. JETRO declared Pakistan as likely to be second choicest place for FDI. Morgan Stanley observed that rise of Pakistan was a matter of time. IMF has included Pakistan in their World Economic Outlook in emerging markets economy. Revival of investor's confidence has been captured in better returns on investment in Pakistan which is evident from the portfolio investment in the Karachi stock market by the foreign investors. China and Pakistan has signed agreements of worth $45bn. This investment program will further stimulate foreign investment in the country and help in further uplifting growth across the economy.
The writer's assessment about IMF program is incorrect. He mentioned in the article that the previous government in 2007 got rid of the IMF and now debt has grown since 2007. In order to set the record straight for the writer that previous IMF programme was suspended after four reviews due to non implementation of some of the very significant conditions attached with the loan. The suspension of the program posed negative impact on the economy. As IBRD funding was stopped, World Bank and other international financial institutions closed the doors. International rating agencies downgraded its rating for Pakistan. Foreign exchange reserves dropped significantly. International predictions were that Pakistan will default in June, 2014.
The current government has entered into an agreement with IMF to pay off the earlier loans obtained by the successive governments. The successful reviews with the IMF has led the resumption of policy lending from the World Bank and Asian Development Bank, which was suspended for lack of a stable macroeconomic framework before June 2013. After achieving macroeconomic stability and the requisite increase in foreign reserves, Pakistan is declared eligible again for IBRD facilities.
In view of above development, the multilateral donors and international markets have also reposed tremendous confidence in Pakistan's economic future which will go a long way in building up a strong economy. The writer also commented on public debt and stated that the current government since taking over the office has embarked on securing loans at a level which is alarming and unprecedented.
The writer's assessment is not true because the focus of Pakistan's debt strategy is lengthening the maturity profile to reduce the refinancing risk along with sufficient provision of external inflows in the medium-term. In line with the strategy, Pakistan is on track on lengthening the maturity profile of domestic debt while keeping in view cost-risk trade-offs as the share of medium to long term Pakistan investment bonds (PIBs) in total domestic debt increased to 34 percent by end June, 2015 as compared with only 14 percent in 2013. Accordingly, percentage of domestic debt maturing in one year reduced to 47 percent by end 2014-15 compared with 64 percent at the end of 2012-13. The public debt to GDP ratio is on a declining trajectory. The fiscal consolidation paved the way for a reduction in public debt, which fell from 63.9 percent in 2012-13 to 63.4 percent at the end of 2014-15. In the next three years, debt to GDP ratio will be brought down to less than 60 percent in accordance with the provisions of the Fiscal Responsibility and Debt Limitation (FRDL) Act, 2005 through effective fiscal and prudent debt management.
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