Press statement
IMF Resident Representative Office in Pakistan

September 10, 2003

An IMF staff team led by Mr. Milan Zavadjil, Division Chief in the Middle Eastern Department, today concluded its discussions with the authorities for the combined 6^th and 7^th quarterly reviews of Pakistan's economic program. The IMF supports the program with a three-year arrangement under the Poverty Reduction and Growth Facility (PRGF) that was approved on December 6, 2001. The fifth review was completed on June 18, 2003. Half of the total amount of SDR 1.034 billion (about $1.4 billion) under the PRGF loan has been disbursed.

Pakistan's macro-economic outcome exceeded expectations during the fiscal year that ended in June 2003 and all quantitative performance criteria under the program were met consistently. The fiscal deficit was contained to 4.5 percent of GDP. Inflation slowed to less than 2 percent year-on-year in June. Export resurgence and strong private transfers led to an external current account surplus of over 4 percent of GDP; official foreign reserves approached the equivalent of one year of imports; and public debt indicators continued to improve. Economic growth at 5.1 percent was broad-based, including in agriculture which should help relieve rural poverty.

The mission concurred with the authorities that the consistent implementation during the current fiscal year of the Government's medium-term economic strategy will further consolidate these recent gains. Increased savings and investment and strengthened institutions are central to sustained higher economic growth and poverty reduction. Efforts in the current year need to be directed at : improving the operational efficiency of public electricity companies; modernizing the National Savings Scheme within a well-functioning capital market; further broadening the base and improving the administration of taxation; and increasing the transparency and effectiveness of public institutions.

Based on Pakistan's recent economic performance and the government's policy commitment, the mission will propose to the Managing Director that he recommend completion of the review by the Executive Board. A Board meeting on Pakistan could take place in late October 2003. Completion of the combined 6^th and 7^th reviews by the Executive Board would trigger a disbursement of about $235 million.