Press Release: Press Statement at the Conclusion of the Visit of Mr. Agustín Carstens to Pakistan, January 12-13, 2005

January 18, 2005

The following statement was issued on Friday, January 14, 2005 in Islamabad, Pakistan at the conclusion of a visit by an International Monetary Fund (IMF) staff mission:

"Mr. Agustín Carstens, Deputy Managing Director of the IMF concluded today a two-day visit to Pakistan. During his visit, he met Prime Minister Aziz, the Ministers and staff from the key economic ministries, as well as representatives from the State Bank of Pakistan (SBP) and the financial sector.

"The purpose of the visit was, first, for Mr. Carstens to appraise himself directly of the impressive economic gains made by Pakistan in recent years under the government's comprehensive reform program, and of prospects for further acceleration in these gains. That program was supported by a now completed arrangement under the IMF Poverty Reduction and Growth Facility (PRGF). Second, Mr. Carstens also wanted to discuss how the IMF and Pakistan, going forward, can work together in addressing the challenges of accelerating growth on a sustainable and equitable basis, for the benefit of all of Pakistan's people.

"Mr. Carstens wished to congratulate the Pakistani government for the successful implementation of the PRGF program with the IMF. Full ownership of the program by the Pakistani government had been key to its effectiveness. Under this program, Pakistan achieved impressive turnarounds in its external and fiscal position, restored growth and lowered inflation, rebuilt a comfortable level of international reserves, and regained the confidence of, and access to, the international financial markets. Under the program, Pakistan also implemented an ambitious and comprehensive agenda of structural reforms, in particular banking system reform, privatization, trade liberalization, and governance reform. These reforms are now bearing fruit, with accelerated economic growth and a significant pick-up in both domestic and foreign investment.

"Going forward, the key challenge is to accelerate and sustain growth. In this context, Mr. Carstens appreciated the significant progress made in opening-up Pakistan's economy to international trade and competition by bringing down trade barriers and reducing import tariffs, and in promoting the growth of exports.

"An accelerated and sustainable growth that also significantly reduces poverty in Pakistan will require continuation by the government of its on-going effort to address the human development and social protection needs of the country. For this purpose, the momentum in mobilizing tax and other budget revenue on as broad a basis as possible will need to be maintained.

"A key challenge is to keep inflation low in order to further consolidate the gains in the investors' confidence, so critical to sustain high rates of investment and economic growth. Meeting this challenge is likely to require some acceleration in the tightening of monetary policy already initiated by the SBP.

"Mr. Carstens indicated that the IMF looks forward to continue working with Pakistan after the completion of the PRGF program. The IMF will continue offering its policy advice and technical assistance in the monetary and fiscal areas, in particular, drawing on its extensive international experience."


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