IMF says Pakistan’s economy unstable, proposes implementation of structural reforms

ISLAMABAD: International Monetary Fund (IMF) has said that Pakistan’s economy remains vulnerable because of delayed implementation of structural reforms and widening imbalances on external accounts.

According to the IMF’s official announcement made on Thursday, it stressed the need to maintain momentum on the reform of Personal Income Tax (PIT). The IMF has clearly demanded jacking up slabs and rates of PIT, which was resisted by the Pakistan finance minister on the eve of the last budget 2021-22, as noted by News International.
But it seems that the IMF wanted implementation on it in the next budget for 2022-23 before the end of the Fund-sponsored Extended Fund Facility (EFF) programme in coming September 2022.

Only two reviews are pending; the seventh review under the EFF is expected to be done in April 2022 while the eighth review would be accomplished following the announcement of the budget 2022-23.

Meanwhile, the IMF has given the forecast for inflation will be standing at 9.4 per cent. The general government and government-guaranteed debt is estimated to climb to 86.7 per cent of Gross Domestic Product (GDP) during the current fiscal year.

Also, it is worth mentioning here that the government approved rebasing of national accounts and estimated that the GDP growth stood at 5.37 per cent for the last fiscal year against provisional estimates of 3.94 per cent.

Further, the size of the GDP also escalated in rupee and dollar terms and stood at Rs 55.5 trillion and USD 347 billion respectively, according to News International.

The completion of the review allows the authorities to draw the equivalent of Special Drawing Rights (SDR) SDR 750 million (about USD 1 billion), bringing total purchases for budget support under the programme to SDR 2,144 million (about USD 3 billion or 106 per cent of quota).

On the other hand, the EFF was approved by the IMF’s Executive Board on July 3, 2019, for SDR 4,268 million (about USD 6 billion at the time of approval or 210 per cent of quota).

Further, the programme aims to support Pakistan’s policies to help economic recovery from the COVID-19 pandemic, ensure macroeconomic and debt sustainability, and advance structural reforms to lay the foundations for strong, job-rich, and long-lasting growth that benefits all Pakistanis.

Pakistan economy external pressures also started to emerge in 2021, including a widening current account deficit and depreciation pressures on the exchange rate, which also reinforced domestic price pressures.

The recent policy adjustment was appropriate to address these challenges and maintain economic stability. The economy is set to continue recovering in Financial Year 2022, with real GDP growth projected at 4 per cent, while inflation is expected to pick up this year before gradually slowing down, as analyzed by News International.

Continued commitment to a market-determined exchange rate and a prudent macroeconomic policy mix will help reduce the current account deficit, and ease external pressures over the medium term.

However, Pakistan remains vulnerable to possible flare-ups of the pandemic, tighter international financial conditions, a rise in geopolitical tensions, as well as delayed implementation of structural reforms, as reported by News International. (ANI)