World Economy

Reforms Will Reduce Risks to Pak Economy

Reforms Will Reduce Risks to Pak EconomyReforms Will Reduce Risks to Pak Economy

The International Monetary Fund welcomed the commitment of the Pakistan government to economic reforms which has significantly reduced the short term risks to the economy.

“The authorities are making progress with consolidating macroeconomic stability and tackling structural obstacles to growth with several important structural reforms in various stages of preparation or implementation,” said Harald Finger who headed the IMF team to discuss the ninth review of economic performance under the IMF program, AAP reported.

Announcing a staff level agreement with Pakistan after the conclusion of talks in Dubai, Harald Finger described the discussion as productive.

The IMF team met with the Pakistani team headed by Finance Minister Ishaq Dar, State Bank Governor Ashraf Wathra and other senior officials. The meetings were held both in Islamabad and Dubai from October 26 to November 5.

After productive discussions, the mission and the Pakistani authorities have reached staff level agreement on the completion of the ninth review under the EFF arrangement, he added.

The agreement is subject to approval by the IMF management and the executive board. Upon completion of this review about $502 million will be made available to Pakistan, he added.

 “Economic activity continues to improve while challenges remain. Real GDP is expected to grow by about 4.5% in FY 2015-16 helped by lower oil prices, planned improvements in the supply of energy and investment related to the China Pakistan Economic Corridor,” Finger said.

At the same time, he added, the slowdown in private credit growth and weakness in exports and imports are weighing on growth prospects.

Headline consumer price inflation is expected to increase to around 4.5% by end of the fiscal year due to a likely bottoming out of the effects of low commodity prices but to remain well anchored by continued prudent monetary policy.

Gross international reserves reached $15.2 billion by the end of September 2015 up from $13.5 billion at end of June 2015 and covering close to four months of prospective imports.

However, the performance criteria on net domestic assets and the fiscal deficit were missed as was the indicative target on tax revenue. The mission welcomed the authorities’ plans to take action to attain the budget deficit and tax revenue targets for FY 2015-16 and to bring NDA in line with program targets.