IMF Staff Completes Article IV Mission to Pakistan

IMF News, April 5, 2017

Source details

Press Release No. 17/117; April 5, 2017.
An IMF staff team, led by Harald Finger, visited Dubai during March 28–April 5, 2017 to conduct discussions with the Pakistani authorities on the 2017 Article IV Consultation.
End-of-Mission press releases convey preliminary findings after a visit; the views are those of IMF staff and do not necessarily represent the views of the IMF’s Executive Board.

After three years of reforms, Pakistan has strengthened its macroeconomic resilience and economic outlook, providing an opportunity to build on recent progress with structural reforms and set the economy on a higher growth path.
The mission expects:
- economic growth to reach 5 percent in FY2016/17 helped by improving global economic conditions, rising investment related to the China-Pakistan Economic Corridor (CPEC), and recovering agriculture.
- the current account deficit to reach 2.9 percent of GDP in FY2016/17 owing to a higher trade balance—in part reflecting increased imports of capital goods and energy—and stagnant remittances.
- average headline inflation to be contained at 4.3 percent.
- over the medium term, growth could accelerate to about 6 percent on the back of stepped-up CPEC and other investments, improved energy supply, and continued structural reforms.
Risks and constraints identified:
- slower-than-expected growth of large-scale manufacturing and stagnant exports are weighing on growth prospects.
- challenges in the fiscal, external, and energy sectors could affect the hard-won stability gains.

Fiscal policy:
- Stronger fiscal consolidation efforts will be needed to make up for the lower-than-expected revenue in the first half of this year and achieve a further deficit reduction next year.
External sector:
- Greater exchange rate flexibility and efforts to improve export sector productivity are needed to address the widening trade deficit and strengthen the economy’s ability to absorb medium-term CPEC-related and other capital outflows.
Energy sector:
- Bringing the power distribution sector to full cost recovery will be critical to ensure long-term success of new energy initiatives and minimize fiscal costs.
Monetary and financial policies:
- Alongside the above, monetary policy needs to remain prudent.
- Promote financial inclusion and deepening.
Structural reforms and social policy:
- Maintain momentum with growth-enhancing structural reforms and expand social safety nets.
- Restructure and seek private sector participation in loss-making public enterprises.
- Improve the business climate.

The staff team met with Finance Minister Ishaq Dar, State Bank of Pakistan (SBP) Governor Ashraf Wathra, and other senior officials.
The team thanks the authorities and technical staff for their cooperation and productive discussions, and reaffirms the IMF’s support of Pakistan’s economic reform program.

IMF Press Release No. 17/117; April 5, 2017.