WASHINGTON: The International Monetary Fund (IMF) has praised commitment of Pakistan’s government to strengthen country’s fiscal position, saying the economic recovery and macroeconomic stability has further receded short-term vulnerabilities.
In a statement issued after the meeting of the Executive Board in Washington, IMF’s Deputy Managing Director Mitsuhiro Furusawa emphasized the need of preserving and consolidating macroeconomic stability and further advancing key structural reforms.
The economic recovery had gradually strengthened and short-term vulnerabilities had further receded on the back of improved macroeconomic stability and progress on structural reforms, the IMF Director said.
He praised the government for its commitment to the fiscal consolidation, saying “the authorities are on track to achieve their program’s end-year fiscal targets, and their commitment to continue with gradual fiscal consolidation in FY2016/17 is welcomed”.
The Executive Board approved the immediate disbursement of about $501 million after completion of the 11th review of Pakistan’s economic performance under a three-year program supported by an Extended Fund Facility arrangement.
With the release of the fresh tranche, the total disbursement stood at about $6.01 billion.
Praising steps for fiscal consolidation, Mr. Furusawa said the amendments to the Fiscal Responsibility and Debt Limitation Act would strengthen the anchor for medium-term fiscal policy, supporting fiscal sustainability and medium-term macroeconomic stability.
Furthermore, he said, the new framework for Public-Private Partnerships would foster much needed growth-supporting investments and help manage associated fiscal risks.
He emphasized on sustaining progress with tax administration reforms to widen the tax base which, he said was needed to increase tax revenues and create needed fiscal space for priority infrastructure and to reinforce social expenditures.
The IMF Director also noted rising foreign exchange reserves and said it would further bolster external buffers and reduce vulnerabilities.
He also emphasized the need of maintaining a prudent monetary policy stance to preserve the achievements in containing inflation and to support macroeconomic stability.
Mr. Furusawa also praised steps to strengthen the State Bank autonomy “Advancing financial sector reforms is important to reinforce financial sector stability and development.”
He welcomed expansion of the coverage of tax crimes and said it would contribute to improve tax compliance and governance.
“Continued progress with structural reforms is needed to raise Pakistan’s growth potential. Restructuring and privatizing loss-making public sector enterprises (PSEs) remain a priority to ensure their financial viability, reduce fiscal costs and strengthen the efficiency of the economy,” he added.
The IMF official welcomed the decision of the government to contain the accumulation of power sector arrears, and said that efforts to complete the energy sector reforms should remain a priority.
The commitment of the government to move forward with the implementation of the new business climate reform strategy will be key to boost competitiveness and foster investment and private-sector led growth, he concluded.