ISLAMABAD -  Top economic mangers of the country on Monday reviewed several options to avert an impending balance of payment crisis including tapping of capital markets.

Pakistan’s foreign exchange reserves had sharply depleted by over $4 billion in last one year due to the growing pressures on external account because of increasing imports and decreasing exports. The current account deficit had widened an all-time high of $12.09 billion for 2016-17 due to the massive increase in trade deficit and decline in remittances. Pakistan’s trade deficit has recorded at historic level of $32.58 billion during last fiscal year (FY17).

Feeling the heat of the situation, Finance Minister Ishaq Dar chaired a meeting to review the external account position, including the current account, trade account, exports, imports, remittances and financing. The meeting was attended by Minister for Commerce Pervaiz Malik, finance secretary, textile secretary and senior officials of the finance ministry, commerce ministry as well as the State Bank of Pakistan (SBP).

The meeting considered several options including tapping of capital markets and finance facilities. The government in the budget for the ongoing financial year 2017-18 had projected to generate $1 billion from issuing Sukuk bond in the international market. Issuing bond could boost the declining foreign reserves of the country. Pakistan had successfully tapped international capital market four times since 2014.

The meeting has also decided to enhance the country’s exports and remittances in order to control the soaring current account deficit of the country. Finance Secretary Shahid Mahmood gave a briefing to the meeting and explained that the recent increase in the current account deficit was largely driven by a sharp increase in imports of machinery for power generation, textile construction and import of petroleum products. He said that these were healthy imports which will increase the production capacity of the economy, and enable higher growth and exports in the future. He also stated that the decline in exports in the last few years was mainly due to global economic conditions, energy shortages for industrial and agriculture sectors, and reduced availability of exportable surplus.

The finance secretary said that due to improvement in the global economic outlook, uninterrupted supply of electricity and gas to industrial sector and increased output, the export decline had begun to bottom out as exports during January-June 2017 registered a growth of 0.52 percent as compared to the same period last year. He highlighted that exports in July 2017 posted a healthy growth of 10.5 percent compared to July 2016. He also highlighted that workers' remittances, which had remained stagnant due to global conditions, have shown an impressive growth of 16 percent in July 2017 as compared to July 2016.

A detailed discussion on various options to give an immediate boost to exports, manage imports and build on the recent month's growth in remittances was held during the meeting. Dar said that a significantly higher export target should be achieved to improve the trade deficit. He said that the export incentive package announced by the government earlier this year was fully endorsed by the industry and all effort should be made to achieve the growth targets set under this package.

Dar directed the finance secretary, secretary commerce and secretary textile industry to remove any impediment that may hinder the achievement of this target. Comprehensive proposals to incentivise remittances were also discussed in detail. In this regard, the finance secretary said that several meetings have been held with the stakeholders, and various measures have been identified including the proposed remittance scoring card, road shows in major corridors, transaction efficiency and settlement of TT charges.

The minister emphasized that remittances were an important foreign exchange stream for the country, and directed that the proposed initiatives in this regard should be finalised immediately. He also highlighted the need to incentivise overseas Pakistanis to invest in Pakistan.

The meeting was also briefed on various financing measures to finance the current account deficit in the short term. It was explained that increased inflows of Foreign Direct Investment and other investments under CPEC will largely fill this gap.

Dar said that the economy was passing through an expansionary phase, and the resultant dividends for the country will be much higher than the cost presently being borne as a result of widening of trade deficit which is only a short-term phenomenon.