IMF Mission Completes the 2015 Article IV Consultation and Ninth Review Mission Under an EFF to Pakistan
“After productive discussions, the mission and the Pakistani authorities have reached staff-level agreement on the completion of the ninth review under the EFF arrangement. The agreement is subject to approval by the IMF Management and the Executive Board. Upon completion of this review, SDR 360 million (about US\\$502 million) will be made available to Pakistan.
“Economic activity continues to improve while challenges remain. Real GDP is expected to grow by about 4.5 percent in FY 2015/16, helped by lower oil prices, planned improvements in the supply of energy, and investment related to the China Pakistan Economic Corridor (CPEC). At the same time, the slowdown in private credit growth and weakness in exports and imports are weighing on growth prospects. Headline consumer price inflation is expected to increase to around 4.5 percent by end-fiscal year due to a likely bottoming out of the effects of low commodity prices, but to remain well-anchored by continued prudent monetary policy. Gross international reserves reached US\\$15.2 billion by end-September 2015, up from US\\$13.5 billion at end-June 2015 and covering close to four months of prospective imports.
“The mission welcomes the authorities’ continued commitment to their IMF-supported economic reform program, which has significantly reduced near-term risks. End-September 2015 quantitative performance criteria on the SBP’s net international reserves, government borrowing from the SBP, and foreign currency swap/forward position were met and so were the indicative ceiling on accumulation of power sector arrears and the indicative floor on social spending under the Benazir Income Support Program (BISP). However, the performance criteria on net domestic assets (NDA) and the fiscal deficit were missed, as was the indicative target on tax revenue. The mission welcomes the authorities’ plans to take action to attain the budget deficit and tax revenue targets for FY 2015/16 and to bring NDA in line with program targets.
“Article IV discussions focused on the reform agenda to increase structural resilience and competitiveness of the economy and generate a stronger and sustainable growth momentum, which remains an important medium-term challenge. The authorities are making progress with consolidating macroeconomic stability and tackling structural obstacles to growth with several important structural reforms in various stages of preparation or implementation. Completing this agenda is critical for Pakistan to achieve its broader economic objectives, and continued effort will be important in the period ahead.
“In this context, reform efforts should continue to focus on strengthening public finances and external reserve buffers, and on accelerating steps to widen the tax net to create space for more infrastructure investment and social assistance. In addition, key priorities for growth include restructuring or privatizing loss-making public enterprises, advancing the energy sector reform, improving the business climate, promoting gender equality, and further expanding coverage under the Benazir Income Support Program (BISP) to protect the most vulnerable.
“The mission thanks the authorities and technical staff for their cooperation and reaffirms the IMF’s support to the government’s efforts to implement their economic reform program.”