Press Release No. 15/375

Press Release: IMF Staff Concludes Review Mission to Pakistan

August 7, 2015

An International Monetary Fund (IMF) staff mission, led by Harald Finger, visited Dubai during July 29-August 7, 2015 to conduct discussions on the eighth review of Pakistan’s economic program supported by a three-year IMF Extended Fund Facility (EFF) arrangement (see Press Release No. 13/322). The staff team met with Finance Minister Ishaq Dar, State Bank of Pakistan (SBP) Governor Ashraf Wathra, and other senior officials. At the conclusion of the mission, Mr. Finger issued the following statement:

“We welcome the authorities’ commitment and progress in implementing their economic program to improve economic resilience, promote economic growth and private sector job creation in Pakistan. After productive discussions, the mission and the Pakistani authorities have reached staff-level agreement on the completion of the eighth review under the EFF arrangement. The agreement is subject to approval by the IMF Management and the Executive Board. Upon completion of this review, SDR 360 million (about US$502 million) will be made available to Pakistan.

“Pakistan’s economy continues to improve. Real GDP growth is expected to increase to 4.5 percent this fiscal year, helped by macroeconomic stability, low oil prices, planned improvements in the domestic energy supply, and investment related to the China-Pakistan Economic Corridor. Inflation dropped to 1.8 percent in July, but is expected to increase in the coming months with the anticipated stabilization of commodity prices. Despite declining exports, the external current account deficit narrowed to 0.8 percent of GDP in FY 2014/15 owing to favorable oil prices and strong growth of remittances. Foreign exchange reserves of the SBP continued to increase at a healthy pace, and reached US$13.5 billion at end-June 2015, covering three months of imports.

“The authorities have continued to make good progress in implementing their economic program, although some targets were missed. All end-June 2015 program targets related to monetary policy were met, in some cases with a significant margin. However, the end-June 2015 performance criteria on the budget deficit and government borrowing from the SBP were missed with a small margin. In addition, the indicative targets on tax revenue and accumulation of circular debt deviated from end-June 2015 program targets. The mission welcomes the authorities’ commitment to attain upcoming budget deficit and tax revenue targets, diversify sources of budget financing, and strengthen control over energy sector arrears.

“Overall, the authorities’ reform program has significantly reduced near-term risks with substantial narrowing of the budget deficit and rebuilding of the foreign exchange buffers. Alongside, increasing social spending under BISP is helping the most vulnerable.

“In the period ahead, consolidating these gains and focusing the reform efforts on overcoming structural challenges still facing Pakistan will be important to achieve higher exports, investment, jobs, and growth. In this context, we welcome the authorities’ plans to continue strengthening public finances and external reserve buffers, and to accelerate efforts to widen the tax net to create space for infrastructure investment and social assistance. In addition, efforts continue to restructure loss-making public enterprises, including through strategic partnerships with the private sector, advance the energy sector reform, improve the business climate, and further expand coverage under BISP to protect the most vulnerable. Decisive progress in these areas will help strengthen competitiveness and resilience of the economy and transform Pakistan into a dynamic emerging market economy.

“The mission thanks the authorities and technical staff for their cooperation and reaffirms the IMF’s support to the government’s efforts to implement their economic reform program.”