The International Monetary Fund (IMF) Thursday said Pakistan’s macroeconomic stabilisation is encouraging but the power sector remains a key bottleneck for the country’s growth.
“While regulatory reform continues, the power sector remains a key bottleneck for growth and a drain on public finances,” Mitsuhiro Furusawa, Deputy Managing Director said following the 7th review of Pakistan’s economic performance according to an IMF update released Thursday.
The statement notes “structural reforms are progressing, although more needs to be done, and the risk of legal challenges remains.”
Islamabad’s adoption of a comprehensive medium-term plan to deal with the accumulation of arrears in the electricity sector is welcome in this respect, it says. “Continued efforts are needed in the areas of privatization of public sector enterprises, trade policy, and business climate reforms.”
The update says China-Pakistan Economic Corridor (CPEC) could help boost Pakistan’s long term development prospects
“Under CPEC, part of China’s efforts to expand trade and transport linkages across central and south Asia, about US$44 billion could be invested in transport infrastructure and energy-related projects including roads, railways, pipelines, and power plants—in Pakistan over the next 15 years.
“While the modalities, terms, and timelines of the various investments under CPEC are yet to be determined, the CPEC has the potential to improve Pakistan’s business environment by reducing infrastructural bottlenecks, and thus to stimulate domestic and foreign investment over the longer run. Sound practices in public debt management and in the evaluation, prioritization, and implementation of public investment projects will be important to ensure that maximum benefit accrues.”
The Fund statement also says “progress toward macroeconomic stabilization is encouraging, thanks to strong performance under the program and despite significant legal, political, and security challenges.
“Macroeconomic imbalances are being gradually addressed. Building on these gains, continued efforts are needed to make the economic reform more sustainable and boost inclusive growth.”