As the International Monetary Fund (IMF) programme remains the only viable option to avoid sovereign default, the government sees stagflation and low foreign exchange reserves as the key challenges in the remainder half of the fiscal year.
The challenges were summarised in the report and the future roadmap was presented to the top civilian and the military brass in the inconclusive National Security Committee (NSC) meeting.
The Ministry of Finance on Friday claimed that stagflation and low foreign exchange reserves would remain challenges for policymakers but said that the external deficits were on the decline and could now be comfortably financed.
“Combination of low (economic) growth, high inflation and low levels of official reserves are particularly challenging for policymakers,” the Economic Adviser Wing of the Ministry of Finance stated in its monthly economic outlook report released on Friday.
The report was released a day after the central bank reported that the foreign exchange reserves had slipped to below $6 billion.
The inflation was projected to remain high at around 23% and the economic growth at around 2% — the combination that makes the conditions of stagflation.
The finance ministry’s report came amid closed-door discussions revealing that there was over $8 billion external financing gap against the requirements in the remainder half of the fiscal year.
The gap widened as compared to the earlier estimates of around $3.5 billion due to low credit ratings and high risk of defaults that would result into non-materialisation of the some of the planned inflows.
