First Deputy Managing Director of the IMF Mr David Lipton has said that Pakistani authorities have made commendable progress in stabilising the economy and launching important structural reforms but economic conditions remain challenging and more needs to be done to reduce vulnerabilities.
Following the executive board’s discussion on Pakistan during which it approved immediate disbursement of $ 555.6 million, David Lipton said country’s fiscal consolidation was on track but additional efforts to broaden the revenue base and improve tax administration were needed to sustain the adjustment. However, the December 2013 investment incentive package runs against these steps. Slippages on targeted cash transfers should be avoided to protect the most vulnerable segments of the population. It will also be important to strengthen public debt management.
The deputy managing director said the monetary policy should increasingly focus on containing inflationary pressures and every effort should be made to reduce the stock of government borrowing from the State Bank of Pakistan in line with programme targets. Efforts to build up foreign reserves should continue through greater exchange rate flexibility and a higher policy rate. Agreed legislation to enhance central bank independence should be presented for parliamentary approval without undue delay.
Mr David Lipton said tackling financial sector risks was an important policy priority. In particular, capital shortfalls at some banks and high nonperforming loans needed to be addressed promptly. Additional steps to deepen the government debt market would also strengthen financial stability.
He welcomed progress on structural reforms but said more remains to be done. The rationalisation of gas prices should move beyond the gas levy; regulation of the energy sector needs to be strengthened; privatization of public sector enterprises should move forward; and bolder actions are needed to improve trade policies and the business climate.”
The executive board of the International Monetary Fund (IMF) Monday completed the second review of Pakistan’s economic performance under a three-year program supported by an arrangement under the Extended Fund Facility (EFF). After the review, the Board authorised an immediate disbursement of an amount equivalent to SDR 360 million (about US$555.6 million).
In completing the second review, the executive board also approved the authorities’ request for waivers of non-observance of the end-December 2013 performance criteria on net swap/forward position and government borrowing from the State Bank of Pakistan (SBP) based on corrective actions taken by the authorities.
