(MENAFN - Gulf Times) Pakistan's Prime Minister Shahid Khaqan Abbasi said political turmoil is hobbling investor confidence and negatively impacting the country's economy before national polls next year.
While Abbasi said Pakistan's economic growth rate is still set to hit a targeted 6% in the financial year through June, corruption investigations against top members of the ruling party and protests in the capital are deterring investors. The government sought to sell as much as $3bn in dollar bonds this week to bridge its widening current-account deficit and shore up dwindling foreign reserves. They raised $2.5bn.
'There is uncertainty in the country ever since these affairs have surfaced, Abbasi said in an interview in Islamabad on November 24, referring to the leaking of files from a Panama law firm last year. That leak brought about the downfall of former Prime Minister Nawaz Sharif in a corruption scandal revolving around his family's purchase of high-end apartments in London.
Taking over after Sharif was ousted in July by the Supreme Court, Abbasi's administration has been shaken by weeks of protests that brought the capital to a standstill and forced the resignation of the country's law minister.
Adding to Abbasi's challenges, he also took over the finance portfolio after granting Finance Minister Ishaq Dar medical leave in London last week. Dar also faces corruption charges related to the Panama probe and could be arrested if he returns to Pakistan. Both Sharif and Dar have denied any wrong-doing.
'It definitely impacts growth, the economy and investor confidence, Abbasi said, adding he would continue to be Pakistan's finance minister through the government's current term that ends on June 4.
Pakistan has been restored to emerging-market status by index provider MSCI Inc. But the country's politics and macroeconomic position led to the biggest foreign outflow this year from Pakistan's stocks since the 2008 financial crisis.
Although central bank Deputy Governor Jameel Ahmad last month played down concerns over the nation's deteriorating external position, some analysts are speculating that Pakistan will need to seek International Monetary Fund or bilateral Chinese support.
Abbasi reiterated that Pakistan, which has received 12 IMF loans since 1988, doesn't need a bailout.
'This deficit is temporary as you are in expansion phase where machinery and other things are increasingly being imported, he said. 'This deficit will go away when the growth comes.
Abbasi's government is betting that more than $55bn of Chinese finance infrastructure projects across the country will boost economic growth to the fastest in more than a decade. However, China's Belt and Road initiative is also adding to a surge in imports, which has contributed to the deterioration in Pakistan's current account position.
The World Bank estimated in October that $17bn of external financing - or 5% to 6% of gross domestic product - is needed in the current financial year through June for Pakistan to bridge its debt payments and current account deficit, which more than doubled to $14.4bn in the year through September.