ISLAMABAD: The International Monetary Fund’s (IMF) Executive Board has lauded the Pakistan’s economy, which has shown positive indicates after the reforms by the present government.
The IMF, in its latest report issued on Wednesday, said that starting from a difficult position in 2013, Pakistan has made substantial progress in reducing near-term economic vulnerabilities.
“Economic growth gradually increased from 3.7 percent in fiscal year (FY) 2012/13 to 4.2 percent in fiscal year 2014-15”, the Fund’s report said.
The international lender said that during the same period, efforts to reduce power subsidies and raise tax revenue have lowered the budget deficit from 8.4 to 5.4 percent of GDP, although part of this adjustment reflected clearance of quasi-fiscal liabilities in the energy sector in 2013.
It said that monetary and financial sector policies have remained prudent in recent years, and the banking system remains sound. Inflation has declined significantly, helped in part by low international commodity prices, the report added.
The IMF report further said that the external position has recently strengthened although medium-term vulnerabilities remain. “Helped by low oil prices and strong remittances, the external current account deficit narrowed to one percent of GDP in FY2014/15 and foreign exchange reserves of the SBP have been rebuilt from 1.5 months of imports in FY2012/13 to 3.8 months of imports in September 2015,” the Fund said.
However, the IMF observed that foreign direct investment (FDI) fell by a half in FY2014/15, albeit with some recovery since, and exports have declined. The report said that economy’s competitiveness has been hampered by security issues, a business climate that lags regional peers and a real effective exchange rate appreciation of 17 percent over the past two years.
“Long-standing structural impediments and a difficult security setting remain key obstacles to growth and investment”, the IMF said.
