{
  "title": "Press Release: IMF Executive Board Concludes 2015 Article IV Consultation with Pakistan",
  "publication": "IMF News, January 12, 2016",
  "sourceUrl": "https://www.imf.org/en/news/articles/2015/09/14/01/49/pr1605",
  "canonical": "https://www.imf.org/en/news/articles/2015/09/14/01/49/pr1605",
  "overlayPath": "/en/news/articles/2015/09/14/01/49/pr1605/index.md",
  "summary": "Starting from a difficult position in 2013, Pakistan made substantial progress in reducing near-term economic vulnerabilities.",
  "publishDate": "2016-01-12",
  "sections": [
    {
      "heading": "Progress since 2013",
      "content": "- Starting from a difficult position in 2013, Pakistan made substantial progress in reducing near-term economic vulnerabilities.\n- Real GDP growth:\n  - 3.7 percent in fiscal year (FY) 2012/13\n  - 4.2 percent in FY2014/15\n- Fiscal consolidation and revenue measures:\n  - Budget deficit lowered from 8.4 percent of GDP to 5.4 percent of GDP (partly reflecting clearance of quasi-fiscal liabilities in the energy sector in 2013).\n  - Efforts included reducing power subsidies and raising tax revenue.\n- Monetary and financial sector:\n  - Monetary and financial sector policies described as prudent; the banking system remains sound.\n  - Inflation declined significantly, helped in part by low international commodity prices."
    },
    {
      "heading": "External position and vulnerabilities",
      "content": "- External current account and reserves:\n  - External current account deficit narrowed to one percent of GDP in FY2014/15.\n  - Foreign exchange reserves of the SBP rebuilt from 1.5 months of imports in FY2012/13 to 3.8 months of imports in September 2015.\n- Trade and investment:\n  - Foreign direct investment (FDI) fell by a half in FY2014/15, with some recovery since.\n  - Exports have declined.\n- Competitiveness:\n  - Competitiveness hampered by security issues, business climate lagging regional peers, and a real effective exchange rate appreciation of 17 percent over the past two years.\n- Medium-term vulnerabilities remain despite recent strengthening of the external position."
    },
    {
      "heading": "Long-standing structural impediments",
      "content": "- Key structural constraints to growth and investment:\n  - Pervasive tax evasion and prevalent tax exemptions.\n  - Loss-making state-owned enterprises.\n  - Energy sector payment arrears and insufficient capacity to meet growing demand.\n- Fiscal consequences:\n  - Constraints on fiscal space for public investment and social spending.\n  - Reliance on domestic financing risks crowding out private sector access to credit and investment.\n- Ongoing reforms:\n  - Reforms in various stages of preparation or implementation: energy sector, privatization/restructuring of public enterprises, tax administration, and monetary and financial sector policies."
    },
    {
      "heading": "Macroeconomic outlook and risks",
      "content": "- Medium-term outlook:\n  - Growth expected to reach about 5.5 percent (contingent on sustained implementation of key reforms).\n  - Inflation expected to gradually rebound to the SBP’s target of mid-single digits.\n- Downside risks:\n  - More challenging external environment could pose downside risks to the outlook."
    },
    {
      "heading": "Executive Board Assessment — key messages and policy recommendations",
      "content": "- General appraisal:\n  - Directors welcomed improvements in economic activity, fiscal and external positions, attributing gains to low oil prices and strong remittances.\n  - Directors commended authorities for significantly reducing near-term vulnerabilities.\n  - Directors noted that longstanding structural weaknesses and security concerns still hold back growth.\n- Fiscal policy and public debt:\n  - Importance of further reducing public debt to more sustainable levels while preserving room for higher spending on critical infrastructure, education, and social programs.\n  - Encouraged comprehensive, front-loaded revenue mobilization reforms, including:\n    - Base-broadening.\n    - Streamlining concessions and exemptions.\n    - Improving tax compliance.\n    - Enhancing coordination with provincial tax authorities.\n  - Need to strengthen public debt and financial management frameworks, further reduce energy subsidies, and restructure or privatize loss-making public enterprises.\n- Monetary and financial sector policy:\n  - Monetary policy should remain prudent and focused on price stability.\n  - Support for targeting positive real interest rates and keeping inflation expectations well anchored.\n  - Commended establishment of an independent monetary policy committee.\n  - Encouraged further steps to enhance monetary policy transmission and to prepare for a shift toward inflation targeting over the medium term, as circumstances permit.\n  - Urged implementation of remaining recommendations of the 2013 safeguards assessment to enhance central bank independence and reduce fiscal dominance.\n- Financial sector stability and governance:\n  - Banking sector remains sound and profitable with good progress on bank capitalization.\n  - Supported efforts to bolster regulatory and supervisory frameworks, set up a deposit insurance scheme, and improve access to finance.\n  - Stressed need to strengthen anti–money laundering and counter–financing of terrorism frameworks, including widening coverage of tax crimes.\n- Structural reforms and competitiveness:\n  - Emphasized advancing reforms in energy, privatization, business climate, and trade integration to restore competitiveness and foster inclusive growth.\n  - Recommended greater exchange rate flexibility to help absorb exogenous shocks and complement export-improvement strategies.\n  - Encouraged initiatives to promote gender equality and expand targeted social protection."
    },
    {
      "heading": "Selected economic indicators and key statistics",
      "content": "- Population: 189.9 million (2014/15)\n- Per capita GDP: US$1,510 (2014/15)\n- Poverty rate: 12.7 percent (2010/11)\n- Main exports: Textiles ($13.5 billion, 2014/15)\n- Unemployment: 6.0 percent (2013/14)\n\n- Output and prices (annual percentage change):\n  - Real GDP at factor cost: 3.6 (2010/11), 3.8 (2011/12), 3.7 (2012/13), 4 (2013/14), 4.2 (2014/15), 4.5 (2015/16 Proj.)\n  - GDP deflator at factor cost: 19.5 (2010/11), 5.7 (2011/12), 7.1 (2012/13), 6.9 (2013/14), 4.7 (2014/15)\n  - Consumer prices (period average): 13.7 (2010/11), 11 (2011/12), 7.4 (2012/13), 8.6 (2013/14)\n  - Consumer prices (end of period): 13.3 (2010/11), 11.3 (2011/12), 5.9 (2012/13), 8.2 (2013/14), 3.2 (2014/15), 6 (2015/16 Proj.)\n- Fiscal indicators (percent of GDP):\n  - Revenue and grants: 12.6 (2010/11), 13.5 (2011/12), 14.5 (2012/13), 15.4 (2013/14), 15.5 (2014/15)\n  - Expenditure (including statistical discrepancy): 19.6 (2010/11), 22 (2011/12), 21.9 (2012/13), 19.9 (2013/14), 19.2 (2014/15)\n  - Budget balance (including grants): -6.7 (2010/11), -8.6 (2011/12), -8.4 (2012/13), -4.9 (2013/14)\n  - Budget balance (excluding grants): -7 (2010/11), -8.9 (2011/12), -8.5 (2012/13), -5.7 (2013/14), -5.4 (2014/15), -4.3 (2015/16 Proj.)\n  - Primary balance: -2.9 (2010/11), -3.9 (2011/12), -0.3 (2012/13), 0.1 (2013/14)\n  - Total general government debt: 55.3 (2010/11), 60.5 (2011/12), 62.9 (2012/13), 63.7 (2013/14), 63.2 (2014/15), 62.4 (2015/16 Proj.)\n  - External general government debt: 22.4 (2010/11), 20.1 (2011/12), 18.5 (2012/13), 18 (2013/14)\n  - Domestic general government debt: 32.9 (2010/11), 38.1 (2011/12), 42.8 (2012/13), 43.8 (2013/14), 44.8 (2014/15), 44.4 (2015/16 Proj.), 44.2 (additional series)\n- Monetary sector (annual changes in percent of initial stock of broad money):\n  - Net foreign assets: 4.1 (2010/11), -3.8 (2011/12), -3.4 (2012/13), 2.2 (2013/14), 1.6 (2014/15), 1.9 (2015/16 Proj.)\n  - Net domestic assets: 11.8 (2010/11), 17.9 (2011/12), 19.3 (2012/13), 8.8 (2013/14), 10.8 (2014/15), 10.1 (2015/16 Proj.)\n  - Broad money (percent change): 15.9 (2010/11), 12.5 (2011/12), 13.2 (2012/13), 12.4 (2013/14), 12 (2014/15)\n  - Reserve money (percent change): 17.1 (2010/11), 15.8 (2011/12), 12.9 (2012/13), 9.9 (2013/14), 10 (2014/15)\n  - Private credit (percent change): 7.5 (2010/11), -0.6 (2011/12), 5.6 (2012/13), 9.8 (2013/14), 10.7 (2014/15)\n  - Six-month treasury bill rate (period average, in percent): 12.3 (2010/11), 9.7 (2011/12)\n- External sector:\n  - Merchandise exports, U.S. dollars (percentage change): 28.9 (2010/11), -2.6 (2011/12), 0.4 (2012/13), 1.1 (2013/14), 0.7 (2014/15), -4 (2015/16 Proj.)\n  - Merchandise imports, U.S. dollars (percentage change): 14.9 (2010/11), 12.8 (2011/12), -0.9 (2012/13), -0.2 (2013/14), -1.9 (2014/15)\n  - Current account balance (in percent of GDP): -2.1 (2010/11), -1.1 (2011/12), -1.3 (2012/13), -1 (2013/14)\n- External public and publicly guaranteed debt (in percent of exports of goods and services, unless otherwise indicated): 153.4 (2010/11), 160.3 (2011/12), 144.6 (2012/13), 166.6 (2013/14), 164.5 (2014/15), 168.2 (2015/16 Proj.), 188.7 (additional series)\n  - Debt service: 13.4 (2010/11), 16.2 (2011/12), 21.6 (2012/13), 23.5 (2013/14), 22.5 (2014/15), 24.9 (2015/16 Proj.)\n- Gross reserves (in millions of U.S. dollars) 5/: 14,784 (2010/11), 10,799 (2011/12), 6,008 (2012/13), 9,096 (2013/14), 13,534 (2014/15), 17,131 (2015/16 Proj.), 17,666 (additional series)\n  - In months of next year's imports of goods and services: 2.7 (2010/11), 1.5 (2011/12), 4.3 (2012/13)\n- Memorandum items:\n  - Real effective exchange rate (annual average, percentage change): 6.1 (2010/11), 3 (2011/12), 0.9 (2012/13), 10.9 (2013/14)\n  - Terms of trade (percentage change): 7.3 (2010/11), -10 (2011/12), 0.3 (2012/13), 5.1 (2013/14)\n  - Real per capita GDP (percentage change): 1.7 (2010/11)\n  - GDP at market prices (in billions of Pakistani rupees): 18,276 (2010/11), 20,047 (2011/12), 22,379 (2012/13), 25,068 (2013/14), 27,384 (2014/15), 30,170 (2015/16), 29,907 (additional series)\n  - GDP at market prices (in billions of U.S. dollars): 213.6 (2010/11), 224.4 (2011/12), 231.1 (2012/13), 243.4 (2013/14), 267.5 (2014/15)\n\nPress Release No. 16/05 — IMF Executive Board concluded the Article IV Consultation with Pakistan on December 18, 2015.\n\n---\n\n\n References\n\n- Pakistan and the IMF\n- Press Releases\n- PRESS CENTER\n- http://www.imf.org/external/np/sec/misc/qualifiers.htm\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2015/09/14/01/49/pr1605"
    }
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    "Published: January 12, 2016",
    "Starting from a difficult position in 2013, Pakistan made substantial progress in reducing near-term economic vulnerabilities.",
    "Real GDP growth:",
    "Fiscal consolidation and revenue measures:",
    "Monetary and financial sector:",
    "External current account and reserves:",
    "Trade and investment:",
    "Competitiveness:",
    "Medium-term vulnerabilities remain despite recent strengthening of the external position.",
    "Key structural constraints to growth and investment:",
    "Fiscal consequences:",
    "Ongoing reforms:",
    "Medium-term outlook:",
    "Downside risks:",
    "General appraisal:",
    "Fiscal policy and public debt:",
    "Monetary and financial sector policy:",
    "Financial sector stability and governance:",
    "Structural reforms and competitiveness:",
    "Population: 189.9 million (2014/15)",
    "Per capita GDP: US$1,510 (2014/15)",
    "Poverty rate: 12.7 percent (2010/11)",
    "Main exports: Textiles ($13.5 billion, 2014/15)",
    "Unemployment: 6.0 percent (2013/14)",
    "Output and prices (annual percentage change):",
    "Fiscal indicators (percent of GDP):",
    "Monetary sector (annual changes in percent of initial stock of broad money):",
    "External sector:",
    "External public and publicly guaranteed debt (in percent of exports of goods and services, unless otherwise indicated): 153.4 (2010/11), 160.3 (2011/12), 144.6 (2012/13), 166.6 (2013/14), 164.5 (2014/15), 168.2 (2015/16 Proj.), 188.7 (additional series)",
    "Gross reserves (in millions of U.S. dollars) 5/: 14,784 (2010/11), 10,799 (2011/12), 6,008 (2012/13), 9,096 (2013/14), 13,534 (2014/15), 17,131 (2015/16 Proj.), 17,666 (additional series)",
    "Memorandum items:",
    "[Pakistan and the IMF](http://www.imf.org/external/country/PAK/index.htm)",
    "[Press Releases](https://www.imf.org/en/news/searchnews)",
    "[PRESS CENTER](http://presscenter.imf.org/)",
    "[http://www.imf.org/external/np/sec/misc/qualifiers.htm](https://www.imf.org/external/np/sec/misc/qualifiers.htm)",
    "[https://www.imf.org/en/home](https://www.imf.org/en/home)"
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