Pakistan's finance minister said the government has taken steps that will put the country on the right track and help avoid an economic collapse. He said that that will cause pain for its people.
The recent rise in commodity and energy prices have made the country's debt problems worse. The country's official liquid foreign exchange reserves fell by $754 million to $8.57 million in the week ended July 22 from the previous week.
There were serious concerns about Pakistan getting into a default-like situation, but fortunately, we have made some changes. Black belt tightening has been brought in by us. In an interview with CNBC on Tuesday, Miftah Ismail said he thought we had averted that situation.
We're in a program with the International Monetary Fund. The agreement has been reached at the staff level. The board is expected to approve us this month. Subsidies from power and fuel have been removed. Taxes have been raised. I think we are on the right path.
The recent measures taken by the government will cause a lot of pain for the people in Pakistan.
Look at another option. The minister said that this would have been worse if we had gone to Sri Lanka.
Pakistan is facing a serious debt crisis that is similar to the foreign exchange shortage that has hit Sri Lanka.
The economic crisis in Sri Lanka has caused shortages of food and fuel. The country has asked for help from the International Monetary Fund.
In July, Pakistan struck a deal with the International Monetary Fund. The country reached a staff level agreement with the International Monetary Fund.
In the coming weeks, the International Monetary Fund will give a first disbursement of over $1 billion to Pakistan.
Pakistan is facing a difficult economic situation. The International Monetary Fund said in a statement that domestic demand to unsustainable levels was caused by a difficult external environment.
The International Monetary Fund wants our reserves to increase by $6 billion because of a $4 billion funding gap. We have $2 billion and we should get $4 billion from our friends. Within a day or two, we will have that number, because we are mostly there.
According to official data, Pakistan's headline inflation increased to 24.93% in July, the highest level in over a year.
The finance minister highlighted in his budget speech that the government wanted to use monetary and fiscal policy to lower prices.
I think wheat prices are going to go down. No matter what the headline number is, core inflation in Pakistan is around 12 or 13 percent.
Monetary expansion has stopped. I believe our interest rates are high. The core inflation should be brought back to where it was.
The finance minister said that the government needed to reduce its imports to bring down oil demand.
The pressure against the Pakistan rupee has lessened now that the imports have come down. It appreciated against the U.S. dollar. He said that inflation will begin to decline now.
It's difficult to give a time frame for when things will improve for Pakistan, but he said that the economy is in good shape.
We should be able to get handle of the economy in the second quarter of this fiscal year. There will be a decrease in the current account deficits. Markets will believe in our measures. Things will begin to look better.
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