Creating space for growth

The nine-month $3 billion Stand-By Arrangement (SBA) with the International Monetary Fund is generally seen as a breather and bridge to a subsequent broad-based and longer reform programme to enforce financial discipline and reduce debt default risks. It has brought much-needed relief to the policymakers and capital market but does not enthusiastically raise hope of an early economic recovery. With shrinking national income (GDP) growth, cash and dollar-starved Pakistan faces a daunting challenge to repay $25bn debt during the current financial year. That would squeeze the space available for investment to shore up the economy. Notwithstanding the extraordinary rally in the share market attributed to the SBA, analysts believe that raising fresh capital through the stock exchange will likely remain muted. Only one company, Globe Residency (a real estate investment trust), held the initial public offering in 2022-23 to raise Rs1.4bn. The dollar was down by Rs23.49 to Rs275.44 in the inter-bank market on July 4 from the peak of Rs298.93 on May 11 owing to expectations of higher greenback inflows, attributed to the Eid and SBA.