IMF warns Pakistan over impeding risks to economy
*ISLAMABAD:* *The International Monetary Fund (IMF) has urged Pakistan to take immediate counter-acting measures to minimize the increasing risks concerning the country’s economic and financial outlook.*
In a statement released almost one and a half day after the conclusion of its Executive Board meeting held with Pakistan, the IMF executive board asked the centre to refocus on near-term policies to preserve macroeconomic stability after widening external and fiscal imbalances, besides reduction in foreign exchange reserves.
The board also asked the government to strengthen the fiscal discipline. The projections of IMF over the current account and budget deficits put former finance minister Ishaq Dar’s all claims under question at time of announcing the government’s fifth budget in June last year.
With its latest prediction, the IMF said in the statement that Pakistan’s official gross foreign currency reserves could slip to $12.1 billion – barely enough to finance 10 weeks of imports.
The board has predicted that the country’s budget deficit likely to hit 5.5 percent of the GDP — almost Rs505bn or 1.4pc — higher than 4.1pc budgeted by the government.
With “rising external and fiscal financing needs and declining reserves, risks to Pakistan’s medium-term capacity to repay the Fund have increased since completion of the Extended Fund Facility (EFF) arrangement in September 2016”, noted the IMF in its handout released Wednesday morning.
However, It said Pakistan’s near-term outlook for economic growth is broadly favourable and real GDP growth is expected to grow by 5.6% in fiscal year 2017-18, supported by improved power supply, investment related to the China-Pakistan Economic Corridor (CPEC), strong consumption growth, and ongoing recovery in agriculture.
The directors underlined the importance of accelerating structural reforms to reinforce macroeconomic stability, raise competitiveness and promote higher and more inclusive growth.
Moreover, the board of IMF directors called for anti-money laundering and counter-terrorism financing regimes in wake of recent setback at the Financial Action Task Force.
The IMF directors have urged the country’s managers to further devalue the currency to minimize damages to the external sector, besides levying more taxes to control the growing budget deficit.