Pakistan’s economy has been under a burden of loans and trade deficit. According to an estimate, the recent import payments amounted to almost $100 million and there are still other import payments lined up for the next few weeks. In early 2012, 8 million dollars payment was due to the International Monetary Fund (IMF). Moreover, the strained United States and Pakistan relationship has had a negative influence on international lending agencies. The foreign reserves also fell to 16.96 billion dollar.
Investors have the same old concern regarding political instability and violence. This time, however, due to the weakening position of Euro, the global economy has had an effect as investors are pulling out of the riskier assets. It would be some time before Pakistan’s economy begins to stabilise and the rupee sees a significant rise in value compared to dollar, but all hope is not lost.
Remittances from overseas Pakistanis have steadily increased over the past few months. In October 2011, 1.02 billion dollar remittances were received. Also, the recent monetary policy which kept the interest rate unchanged at 12 percent would attract private investment as expected. Though, investment opportunities are bleak, they still exist and only a little effort from the government could help increase interest in the local market.
Pakistan has a service-based economy that is moving from a centralized to a more market based system. Pakistan's Fundamental Currency Analysis (short term investment): Pakistan’s currency is undervalued according to the purchase price parity and interest rate parity analysis. Pakistan's Value Investor Survey (short term investment):
Pakistan’s economic environment is very unfavorable for long term economic growth due to low scores on government transparency and economic diversity. An undervalued currency, high investment flow potential, but very unfavorable business environment leads to a neutral outlook for Pakistani investments. The country constantly struggles with internal political disputes, a fast growing population, and a costly, ongoing confrontation with neighboring India; all have a negative long term effect on the economy. The Pakistan's economy also suffers from inflation, which has reached levels as high as 26 percent in the past. Current account shows the trading ability of a country with other partners. Current account deficits mean that they are trading more outside whereas it does not sufficiently earning inside the country. Pakistan needs to control their current account deficit which is damaging its economy in a broader way.
FAHAD ANWAR,
Karachi, May 12.