Default fears still loom but risks reduced: Ismail.

KARACHI -- There is uncertainty at the moment along with the probability of Pakistan going into default - the odds of which have spiked since the country drifted away from negotiations with the International Monetary Fund (IMF), said former finance minister Miftah Ismail.

'The risk of default has reduced after reinstating the market-based rupee-dollar exchange rate mechanism.

However, fears of default still loom,' he said. Expressing optimism, Ismail explained that the State Bank of Pakistan (SBP) has very limited tools, such as increasing interest rate to control inflation, and the probability of a further hike in the key policy rate has minimised after the massive rupee devaluation on Wednesday.

'The government tried to artificially control the rupee-dollar value at a nominal Rs220, which was an unwise decision," he said.

Ismail lamented that last year Pakistan's exports stood at only $30 billion as compared to imports of $80 billion, adding that exports should be increased instead of pegging the rupee value to a fixed exchange rate.

He pointed out that the country had been gripped by a financial turmoil as the debt was skyrocketing, adding "we are stuck in a cycle of...

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