'Government fully aware of challenges facing external account'

Fitch Ratings, on July 3rd 2018, in a brief analysis report, has highlighted issues pertaining to foreign exchange and current account deficit as factors likely to adversely impact the external account. Elaborating further, the agency appreciated the steps taken by government of Pakistan in recent months to ease the pressure on external account situation. The agency notes that the economic growth has been robust over the past year, and is further expected to expand by 5.5 percent in FY18.
The rating agency has positively viewed the 13 percent depreciation of Rupee and enhancement in interest rate by 75 basis points since January 2018 to curtail aggregate demand. The exchange rate flexibility is also expected to contribute towards containing the current account deficit. While the agency has attributed the rise in imports to high oil prices and strong household demand, it has also acknowledged the rise in exports. Fitch is of the view that quick action from newly elected government would be required to overcome external sector difficulties.
The government is fully aware of the challenges facing its external account and short to medium term remedial measures are already being put in place. With exports picking up, about 13 percent increase in July-May period, and China Pakistan Economic Corridor (CPEC) linked imports declining, the current account deficit is expected to peak this year and reduce in the coming years. Remittances have also rebounded with an increase of 3.0 percent respectively during FY18. The government has also successfully decelerated the import bill through imposition of regulatory duties on non-essential and luxury items. The recently announced Amnesty Scheme is bringing in additional inflows. The country has sufficient foreign exchange reserves to meet its obligations on account of external debt repayments.
The government is fully committed to maintain sound policies with the aim of sustaining macroeconomic stability and accelerating economic growth. The growth trajectory achieved over recent years is testimony to the success of the government's reforms agenda. Heavy investments in the energy and infrastructure sectors under the CPEC, keeping inflationary pressure to levels below 4 percent, achieving fiscal discipline and introducing greater transparency are some of the highlights of the Pakistan's economy.
The Government is, therefore, confident of the long term outlook of its external as well as financial sectors.-PR