IMF urges Pakistan to continue economic WASHINGTON: The International Monetary Fund urged Pakistan on Thursday to continue the reforms undertaken under an IMF-backed programme if it wants to further stabilise its economy.
On Wednesday, the IMF executive board completed its 12th and final review of an extended loan facility for Pakistan, enabling immediate disbursement of the final tranche of about $102.1 million.
“Moving forward with key structural reforms is pivotal to foster higher and more inclusive growth.
Restructuring and attracting private sector participation in public enterprises is needed to ensure their financial viability and reduce fiscal costs,” said Mitsuhiro Furusawa, IMF’s Deputy Managing Director and Acting Chair.
“Completing the power sector reform will be important to strengthen the soundness of the sector and support growth,” he added.
On Sept 4, 2013, the IMF executive board approved a 36-month reforms program under an extended fund facility of about $6.15 billion, or 216 per cent of Pakistan’s current quota at the IMF.
During the past 36 months, the IMF closely monitored Pakistan’s economic policies to ensure that the country continues to follow the reforms programme, which was negotiated when the Pakistani economy was at its weakest.
In a statement to the media, Mr Furusawa noted that the IMF-supported programme had helped Pakistan restore macroeconomic stability, reduce vulnerabilities, and make progress in tackling key structural challenges.
He pointed out that in the past three years, Pakistan’s economic growth had gradually increased, inflation had declined, external buffers had been bolstered, financial sector resilience had been reinforced, and the fiscal deficit has been reduced, while social safety nets had also been strengthened.
Mr Furusawa said that tax policy and administration reforms, taken under the plan, allowed for further revenue mobilization and steps have been taken to strengthen the State Bank of Pakistan’s autonomy.
The statement endorsed the Pakistani government’s claim that in the past three years, energy sector reform allowed a reduction of power outages, energy subsidies, and accumulation of power sector arrears.
It also credited the government with adopting a country-wide strategy to improve the business climate.
Mr Furusawa, however, warned that “significant challenges remain for Pakistan” in the post-programme period, and the government must fulfill its commitment to continue implementing strong policies to reinforce macroeconomic stability gains and advance growth-supporting reforms.
In light of the significant public debt burden, he also welcomed the government’s plan to further reduce the fiscal deficit.
The IMF noted that the 2016-17 budget and the revised fiscal responsibility framework could anchor fiscal policy in support of further gradual fiscal consolidation.
Further accumulating international reserves in a context of sufficient exchange rate flexibility will help strengthen confidence and competitiveness, while maintaining a prudent monetary policy stance will be key to supporting low inflation and macroeconomic stability, it added.
Mr Furusawa stressed the need to swiftly address the remaining recommendations of the 2013 safeguards assessment to further strengthen the central bank’s autonomy, adding that further progress in advancing financial sector reforms would be important.
The IMF reminded Pakistan that continuing to move forward with the implementation of the new business climate reform strategy will help increase competitiveness, foster investment, and support private-sector-led growth and job creation.
“Close Fund engagement with Pakistan will continue through policy dialogue in the context of regular consultations and post-programme monitoring, along with ongoing technical assistance,” it added.