Press statement
IMF Resident Representative Office in Pakistan

March 19, 2003

An IMF staff team, led by Klaus Enders, Assistant Director in the Middle Eastern Department, today completed the Islamabad portion of the discussions with the authorities for the fifth review of Pakistan's economic program that is supported under the IMF's Poverty Reduction and Growth Facility (PRGF). The staff and the authorities will continue the discussions during the second week of April in Washington on the occasion of the Spring Meeting at the IMF. Completion by the Executive Board of the fifth review would release a sixth disbursement of about US$117 million to Pakistan under the PRGF.

The mission team reconfirmed the positive macro-economic outlook. The economic growth target of 4.5 percent is well within reach. Inflation remains under control at less than 4 percent. Official foreign reserves exceed US$ 9 billion. All quantitative performance criteria for end-December 2002 were observed, including the CBR revenue target, and the fiscal deficit was well contained.

The staff team and the authorities agreed on the challenges ahead. These include coping with the economic repercussions of the uncertain situation in the Middle East while preserving a rules-based system for energy pricing. WAPDA and KESC losses, arising in large part from continued high line losses and non-payment by consumers in FATA, should be brought down to reduce the power utilities' drain on the budget and ensure the targeted increase in expenditures on poverty reducing and human development outlays, while containing the deficit in order to reduce public debt. Over the coming weeks, the authorities intend to establish a framework for the forthcoming budget (fiscal year beginning July 2003) that supports private sector-led growth while consolidating financial stability and public debt reduction. The planned continuation of the reform of the CBR, steps to strengthen governance in a wide range of areas, and other structural reforms should help create an environment conducive to private sector investment and employment creation, within the framework of a finalized Poverty Reduction Strategy Paper (PRSP).

The IMF approved a three-year arrangement for Pakistan under the PRGF totaling SDR 1.034 billion (about US$1.4billion) on December 6, 2001. The fourth review was completed on February 28, 2003. Pakistan has so far drawn SDR 431 million (about US$ 585 million) under the arrangement.