IMF Praises Pakistan’s Reform Process

Pakistan has worked hard over the last few years to rein in its deficit spending and improve its foreign exchange reserves, and the International Monetary Fund (IMF) says it is beginning to bear fruit. The IMF reviewed the nation’s financial policies and practices, including its economic reform program, and found that it had “significantly reduced near-term risks.”

Pakistan has worked hard over the last few years to rein in its deficit spending and improve its foreign exchange reserves, and the International Monetary Fund (IMF) says it is beginning to bear fruit. The IMF reviewed the nation’s financial policies and practices, including its economic reform program, and found that it had “significantly reduced near-term risks.”

In its report, the IMF praised Pakistan’s progress in restructuring its public enterprises (which had been suffering losses for some time), and implementing social reforms designed to improve access to economic opportunity. The IMF also lauded Pakistan’s progress energy-sector reforms and improved climate for foreign and domestic business. According to the IMF, decisive progress in those areas “will help strengthen competitiveness and resilience of the economy and transform Pakistan into a dynamic emerging-market economy.”

After a recent mission to Pakistan, the IMF team’s leader, Harald Finger, said of the South Asian nation: “We welcome the authorities’ commitment and progress in implementing their economic program to improve economic resilience, promote economic growth and private sector job creation in Pakistan…Pakistan’s economy continues to improve.”

According to the IMF, Pakistan should continue to experience strong economic growth. Current forecasts put Pakistan’s GDP at a 4.5 annual rate of growth, (Pakistan’s fiscal year runs from July to June). Per the IMF, Pakistan’s economic growth has been “helped by macroeconomic stability, low oil prices, planned improvements in the domestic energy supply, and investment related to the China-Pakistan Economic Corridor.”

While GDP grows, the nation’s inflation rate dropped. In July, Pakistan’s rate of inflation dropped to just 1.8 percent. However, that number expects to increase slightly as commodity prices stabilize. Foreign exchange reserves at the Pakistani state bank also rose significantly, reaching $13.5 billion by the end of June.

Although the IMF’s assessments were predominantly positive, it did note a few shortcomings. In particular, Pakistan missed some budget deficit, tax revenue, and government borrowing targets by a narrow margin.

Although the IMF report was predominantly positive, it did caution that a great deal of work remains. “In the period ahead, consolidating these gains and focusing the reform efforts on overcoming structural challenges still facing Pakistan will be important to achieve higher exports, investment, jobs, and growth.”