Pakistan’s former finance minister, Dr. Hafeez Pasha, has raised serious concerns over the State Bank of Pakistan’s (SBP) ongoing interventions in the currency market, warning that these short-term measures are unsustainable in the absence of deeper structural reforms. Speaking during an interview with a private news channel, Dr. Pasha claimed that the central bank is actively purchasing US dollars from informal hawala and hundi markets in an attempt to stabilize the rupee-dollar exchange rate between 278 and 280, and to artificially boost foreign exchange reserves.
While such interventions may temporarily support the currency, Dr. Pasha warned that they cannot substitute for long-term policy action. He argued that the government’s current strategy lacks economic fundamentals, particularly without tangible incentives to stimulate exports and support the industrial base.
Highlighting the broader implications, Dr. Pasha pointed out that Pakistan’s Real Effective Exchange Rate (REER) has now exceeded the threshold of 100, suggesting the rupee is overvalued. An inflated REER typically signals that the domestic currency is stronger than its economic fundamentals justify, thereby undermining export competitiveness. “This makes our goods more expensive in international markets, which harms export growth at a time when we desperately need to earn foreign exchange,” he said.
Dr. Pasha also criticized the government’s recent agreement with the International Monetary Fund (IMF), particularly a controversial measure that imposes a 29 percent tax burden on exporters. He warned that such policies will deter investment in export-oriented industries and limit the country’s ability to correct its current account imbalance.
Touching upon the social cost of economic mismanagement, the former finance minister noted that Pakistan’s per capita income has declined significantly, pushing nearly 44 percent of the population below the poverty line. He added that while headline inflation fell to below one percent in March due to declines in global food and fuel prices, core inflation remains stubbornly high—hovering between 6 to 8 percent—indicating underlying cost pressures in the economy remain unresolved.
Dr. Pasha disputed official data released by the Pakistan Bureau of Statistics (PBS), which claimed a 15 percent drop in fuel prices. According to him, government-regulated prices have stayed relatively stable and the reported decline does not reflect actual consumer experience at the pump.
Regarding foreign financing, Dr. Pasha criticized the limited inflows against the government’s projections. Of the $19.5 billion in anticipated external funding for the current fiscal year—largely reliant on rollovers from China and Saudi Arabia—only $5 billion has materialized so far. He stated this figure is insufficient to meet the country’s mounting debt obligations.
Investment figures have also remained flat. Despite the establishment of the Special Investment Facilitation Council (SIFC), direct and portfolio investment combined reached just $1.4 billion during the first nine months of the fiscal year, unchanged from the previous year. This falls far short of expectations, which ranged between $10 and $15 billion.
Commenting on the country’s overall economic creditworthiness, Dr. Pasha acknowledged the recent ratings upgrade by international agencies but remained cautious. He revealed that Pakistan’s credit score is still a meager 18 out of 100, underlining the fragile state of investor confidence.
Looking ahead, Dr. Pasha expressed concern over the upcoming IMF review in June, warning that worsening economic indicators may complicate the approval process. He noted that the Federal Board of Revenue (FBR) is already facing a revenue shortfall exceeding Rs. 700 billion and is likely to miss its full-year target by nearly Rs. 1 trillion—a development that could jeopardize future IMF disbursements.