DUBAI: The International Monetary Fund (IMF) expresses its mission is to hold fruitful discussions with government and central bank officials on Pakistan’s economic performance under the EFF program and is encouraged by the overall progress in strengthening macroeconomic stability and output growth.
In a statement after the talks with Finance Minister Senator Ishaq Dar and senior Pakistani officials, the IMF said the mission reached staff-level understandings with the authorities on a Memorandum of Economic and Financial Policies which, upon management’s approval, will be considered by the IMF Executive Board in December to conclude the fourth and fifth reviews. Upon the Board’s approval, SDR 720 million (about US$1.1 billion) will be made available to Pakistan.
The International Monetary Fund (IMF) staff mission, led by Mr. Jeffrey Franks, visited Dubai from October 29-November 8, 2014 to conduct discussions on the fourth and fifth reviews of Pakistan’s SDR 4.393 billion (about US$6.6 billion) Extended Fund Facility (EFF), approved by the IMF’s Executive Board on September 4, 2013. The mission met with Finance Minister Ishaq Dar, State Bank of Pakistan (SBP) Governor Ashraf Wathra, and other senior officials.
The IMF statement said Pakistan’s economic indicators are improving, with growth expected to reach 4.3 percent in fiscal year (FY) 2014/2015, inflation on a downward trajectory, and credit to the private sector expanding at a robust pace. The external current account deficit was somewhat higher than expected over the past two quarters, with lower goods exports and higher imports partially compensated by strong remittances performance. The rapid build-up of gross reserves which rose from US$5.4 billion at the end of March to US$9.1 billion by the end of June 2014 stalled thereafter due to delays in divestment and Sukuk transactions and the effects of political uncertainty on capital flows. However, going forward reserves are expected to surpass 3-months of imports by the end of FY 2014/2015.
It said despite some difficulties, the authorities’ reform program remains broadly on track, with the government and SBP meeting most quantitative performance criteria for end of June and end of September 2014. The authorities are committed to taking the necessary corrective actions for missed targets, and with these actions, they will be on-track to meet their objectives for end-December.
The mission was pleased that the government met the indicative targets on social transfers to the poor under the Benazir Income Support Program (BISP). Staff welcomed the government’s efforts to expand support to the poor through the BISP to 4.8 million eligible families by the end of this year.
The mission was encouraged by the strong fiscal performance achieved during FY 2013/2014, and by the authorities’ determination to further lower the deficit to 4.8 percent of GDP in the current fiscal year.
The IMF mission urged the authorities to deepen their structural reform agenda in order to improve Pakistan’s competitiveness in global markets. In the energy sector, declining world oil prices and the expected start of imports of liquefied natural gas provide an opportunity to improve energy supply and continue tariff reforms while containing price increases to consumers. High priority needs to be placed on enhancing governance and efficiency of energy firms, and in strengthening the capacity of regulatory bodies. The mission supports the government’s strategic private partnership agenda and encourages stronger reform efforts in improving the business climate.
