The growing political uncertainty over the past year, driven by the delay in cabinet formation, adversely impacted economic conditions in four main ways: (1) Adverse effects on private investment driven by the postponement of investor decisions amid growing uncertainty; (2) Adverse effects on public investment in infrastructure through the non-materialization
of CEDRE pledges and the ensuing risk of losing them; (3) Adverse effects on the awaited fiscal reforms to curb Lebanon's elevated debt and deficit ratios; and (4) Adverse effects on capital inflows that are sorely needed to finance the country's external deficits.
Ishaq Dar further said that government had missed the target of increasing country's foreign exchange reserves to $15 billion by September 2014 mainly due to the non-materialization
of $2.4 billion.
The Minister said that Imran Khan is disappointed due to non-materialization
of his dreams but he should not divide the nation on national affairs.
Non-tax revenues also remained lackluster, since the government's failure to revamp the ailing Public Sector Entities resulted in zero privatization, whereas a fragile security environment, amongst other things, resulted in non-materialization
of the planned sovereign bond issues in the fiscal year ending June 2010.
He said that Imran Khan has a misunderstanding of becoming prime minister and he has lost his senses on non-materialization
of his dream, he said while commenting upon the statements of Imran Khan and Tahir ul Qadri here Tuesday.
Though, the government has remained pro-development spending, (looking at their historic trend in Punjab province), analysts project non-materialization
of revenue targets would compel government to reduce spending.
Risks to the external position stem from 1) uptick in international oil prices, 2) non-materialization
of foreign inflows and 3) upcoming loan repayments amidst pressure on currency.
The deficit in services increased to $18.394 billion in financial year 2012 compared to $12.456 billion a year earlier primarily on account of non-materialization
of foreign inflows.
Despite the downtrend in inflation, analysts believe this will be the last round of monetary easing considering risks to the economy including: 1) potential increase in government borrowing, which has historically led to higher Core Inflation, 2) speculative pressures on the currency leading to imported inflation and 3) weakness on external front with non-materialization
of earmarked foreign flows (delay in CSF flows and 3G auction), risking forex reserves depletion (down 11%FY13TD) and reentry into the IMF fold.