Recently there have been reports in media regarding high gross external
financing requirements of Pakistan and the risks they pose to sustainability of
the external account going forward. Pakistan's gross external financing
requirements in FY 2018 have been misreported with different media reports
putting the figure differently ranging between US$ 31 billion, to US$ 26
billion, to US$ 17 billion, to US$ 12 billion.
In this context the spokesman of the Ministry of Finance said here Saturday that such media reports misinterpret external
account data and are entirely misleading. First, Pakistan continues to maintain
a healthy level of foreign exchange reserves despite pressures. Second, the
gross financing need for the year 2018 is not as high as reported in the media.
As per international standards, a country's gross financing need is an
aggregate of current account deficit plus debt servicing of the year. Based on
this internationally recognized accounting standard, Pakistan's gross financing
need for 2017- 18 is estimated at US$ 17 to 18 billion (5 to 5.3 % of GDP).
This gross financing need represents current account deficit, medium long term
amortization and stock of short term external debt. It is to be noted that in
FY 2016-17 Pakistan's gross financing need was 17.107 billion i.e. 5.6% of GDP
of that year. As such the external gross financing need this year will be less
than the last year in terms of percentage of GDP.
Furthermore, it is clarified that arrangements are in place to meet the gross
external financing need of the country. These arrangements include government
official inflows from multilateral and bilateral sources, Sukuk / Euro bonds,
privatisation proceeds, foreign direct investment, private capital inflows and
commercial financing, if necessary. After accounting for these arrangements,
the net financing gap that the country faces this year is estimated to be in
the range of US$ 2 to US$ 2.5 billion.
The spokesman said data for the first five months of the current financial year
reveals a rebounding external sector of the economy. After remaining in
negative territory successively for several years, exports have shown 12%
growth in the first five months of this year. Remittances have now returned to
growth zone after remaining negative last year. FDI registered a phenomenal
growth of 57% in first five months of this year. More importantly, imports are
showing visible deceleration on month-on-month basis. With these multifaceted
positive-trends further strengthening in the second half of the current
financial year, Pakistan will be able to make up for the external gross
financing comfortably while maintaining the foreign exchange reserves at a
healthy level. Therefore, any speculation with respect to the
foreign-exchange reserves of the country and the sustainability of the external
account should best be avoided, the spokesman concluded.
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