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Pakistan Trudges Along a Familiar Economic Path

Sep 21, 2018 | 09:00 GMT
Pakistani rupees. Because of a widening trade deficit, Pakistan will continue to rely on external funding to plug its foreign exchange requirements.

Pakistani rupees. Because of a widening trade deficit, Pakistan will continue to rely on external funding to plug its foreign exchange requirements.

(Shutterstock)

As Prime Minister Imran Khan tries to set a new direction for Pakistani politics, his administration is urgently seeking to resolve the country's most serious macroeconomic challenge: boosting its dwindling foreign exchange reserves. As of Sept. 7, the State Bank of Pakistan's net reserves remained beneath $10 billion. That's less than the three-month import cover recommended by the International Monetary Fund (IMF), fueling speculation that Khan will turn to the U.S.-based organization for a bailout. Indeed, Finance Minister Asad Umar has unveiled a series of measures targeting the widening budget deficit ahead of an IMF delegation visit to Islamabad on Sept. 27. While reducing its budget deficit is an important step for Pakistan to take, the deeper causes of the country's foreign exchange crisis are linked to its trade deficit. And because energy comprises Pakistan's most expensive import, the combination of higher oil prices and the lack of an internationally competitive...

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