Pakistan external vital statistics

[Spearhead Research]

Author: Muzammil Aslam
Economist
KASB Securities

Description: Macro headwinds driven by the oil price storm and global credit squeeze clearly
indicate a tough time ahead. And uncertain domestic politics aren’t helping to
mitigate the external account vulnerability. Liquidity conditions have massively
deteriorated lately due to the sustained surge in trade deficit and in turn high
current account deficit. To ensure medium-term macro stability, Pakistan must
reduce domestic demand pressures, fiscal deficit, and top up foreign exchange
reserves through aggressive privatization and FDI inflow. We expect pressure on
the rupee exchange in the absence of foreign inflows and hence expect an
average exchange rate of PRs70-72/US$ in FY09, compared with our earlier
estimate of PRs64.70/US$.

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