ISLAMABAD – The Executive Board of the International Monetary Fund (IMF)has concluded the first Post-Program Monitoring Discussions with Pakistan.
According to IMFGPakistan’s near-term outlook for economic growth isbroadly favorable. Real GDP is expected to grow by 5.6 percent in FY2017/18, supported by improved power supply, investment related to theChina-Pakistan Economic Corridor (CPEC), strong consumption growth, andongoing recovery in agriculture. Inflation has remained contained. However,continued erosion of macroeconomic resilience could put this outlook atrisk.
“Following significant fiscal slippages last year, the fiscal deficit isexpected at 5.5 percent of GDP this year, with risks towards a higherdeficit ahead of upcoming general elections.
Surging imports have led to a widening current account deficit and asignificant decline in international reserves despite higher externalfinancing,” the IMF stated.
“The FY 2017/18 current account deficit could reach 4.8 percent of GDP,with gross international reserves further declining in a context of limitedexchange rate flexibility.
Against the background of rising external and fiscal financing needs anddeclining reserves, risks to Pakistan’s medium-term capacity to repay theFund have increased since completion of the Extended Fund Facility (EFF)arrangement in September 2016.”
The directors took note of Pakistan’s favorable growth momentum, but notedwith concern the weakening of the macroeconomic situation, including awidening of external and fiscal imbalances, a decline in foreign exchangereserves, and increased risks to Pakistan’s economic and financial outlookand its medium.