IMF Staff Concludes Visit to Pakistan
IMF News, October 4, 2018
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Bibliographic details
- Published: October 4, 2018
Economic assessment
- "Pakistan is facing significant economic challenges, with declining growth, high fiscal and current account deficits, and low levels of international reserves."
- The difficult situation "mostly reflects the legacy of an overvalued exchange rate, loose fiscal policy and accommodative monetary policy."
- External factors aggravating the situation: "the fast rise in international oil prices, normalization of US monetary policy, and tightening financial conditions for emerging markets."
- Near-term macro outcomes: "economic growth will likely slow significantly, and inflation will rise."
Policy measures already taken (as of the visit)
- "18 percent cumulative depreciation of the rupee"
- "interest rate increases of cumulatively 275 bps"
- "fiscal consolidation through the budget supplement proposed by the minister of finance"
- "a large increase in gas tariffs closer to cost recovery levels"
- "the proposed increase in electricity tariffs"
- The team: "welcomes the policy measures implemented since last December."
Near-term policy recommendations and financing needs
- "Additional decisive policy action, anchored in a comprehensive strategy, and significant external financing will be needed in the near term."
- Recommended policy package:
- "more exchange rate flexibility and monetary policy tightening"
- "further fiscal adjustment anchored in a medium-term consolidation strategy"
- "strengthening the performance of key public enterprises together with further increases in gas and power tariffs"
- Expected impact: "Together, these steps would help reduce current account pressures and improve debt sustainability."
- Social protection safeguard: "Importantly, to protect the more vulnerable segments of society, there is a need to further strengthen social protection through the Benazir Income Support Program."
- Objective: "These policies will help stabilize the economy and lay the foundations for sustainable and inclusive growth."
Medium-term reform priorities (once stabilization begins)
- "modernizing the tax system and public financial management"
- "strengthening fiscal federalism arrangements"
- "improving governance and eliminating losses of public enterprises"
- "enhancing the SBP’s autonomy"
- "intensifying AML/CFT efforts"
- "improving the business climate and anti-corruption efforts"
- "fostering the economic inclusion of the poor, youth, and women"
Mission facts and engagements
- Mission leader: Harald Finger
- Mission dates: "visited Islamabad from September 27-October 4, 2018"
- Meetings included: "Minister of Finance, Revenue and Economic Affairs Asad Umar; Minister of Planning Khusro Bakhtiar, Advisor to the Prime Minister for Commerce Abdul Razak Dawood, Advisor to the Prime Minister for Institutional Reforms and Austerity Ishrat Hussain, SBP Governor Tariq Bajwa, Finance Secretary Arif Ahmed Khan, FBR Chairman Mohammad Jehanzeb Khan, other senior officials, and representatives of the private sector and development partners."
- Statement on institutional position: "The views expressed in this statement are those of the IMF staff and do not necessarily represent the views of the IMF’s Executive Board. This mission will not result in a Board discussion."
Press Release No. 18/379 — IMF Staff Concludes Visit to Pakistan, October 4, 2018.