Future Outlook of Pakistan Economy
Monday, June 15, 2009
- The trade deficit is rising and has surpassed $14 billion mark and country is most likely to miss export target of $22 billion in fiscal year 2009 owing to slow growth in exports amid global recession. Though, due to falling Imports, trade deficit might stay below last year’s $20 billion if current trend continues.
- First ten months of current fiscal year have been challenging for the economy due to volatility in domestic and international market.
- Pakistan still needs to build its foreign exchange reserves internally to stabilize rupee against foreign currencies. The rising foreign debt is also a matter of concern as debt servicing puts additional pressure on the local currency.
- Interest rates in Pakistan have been kept high to contain inflation and to attract foreign investment but both objectives haven’t been achieved so far and in turn they have raised the cost of production for industries.
- SBP responded the matter by slashing Discount Rate by 100 basis points in April but still there is a strong anticipation about further rate cut in up coming monetary policy statement from Central Bank by the end of mid July.
- We expect a rate cut of 200 to 300 basis points in July’s MPS. Although given the fact that POL prices may have hit the bottom and may rebound in months to come.
- It would be difficult to keep CPI down and maintain the interest rates at relatively low rates.
- The key indicator would be Net Foreign Assets (NFA). If NFA rises due to such inflows that can help the NDA than interest rate would be maintained at relatively lower levels otherwise rates may have to be jacked up again.
- On the FX front we maintain our view that the parity would depreciate at interest rate differential although the timing is difficult to predict.
Source: National Bank of Pakistan, Treasury
Labels: Economy and Business, Pakistan Economy, Treasury
posted @ 11:59 PM,
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