WASHINGTON, Dec 21: The Executive Board of the International Monetary Fund concluded 2004 consultation with Pakistan, and reported that the country's foreign exchange reserves have reached 6.2 months of next year's imports of goods and non factor services.

The IMF directors on Monday emphasized that competition-enhancing structural reforms are "the most effective approach" to maintaining Pakistan's competitiveness.

The report says Pakistan has successfully emerged from crisis. By 1998/99, foreign exchange reserves had virtually run out, public debt obligations were not being met, and economic growth had slowed to an average of below 3 per cent in 1996/97-1998/99.

In response, the government and the State Bank of Pakistan implemented a strong macroeconomic stabilization programme in the face of a severe drought and the adverse post-9/11 environment.

These policies are now bearing fruit. Real GDP growth accelerated to 6 per cent in 2003/04 (July-June), driven by exports, investment, and consumption. Inflation has been contained to 4.6 per cent in 2003/04, though, more recently, 12-month inflation has accelerated, reflecting supply side factors as well as easy monetary conditions.

Reflecting strong export growth and remittances, the balance of payments has strengthened and international reserves now cover over five months of imports. Directors attributed Pakistan's recovery to the steadfast implementation of sound economic policies and broad-based structural reforms, while noting that external support has also played a part.

The IMF Directors observed that, notwithstanding these significant achievements, poverty remains widespread and social indicators are weak in Pakistan. "Thus, they considered that the key policy challenges for the medium term are to maintain strong economic growth and to ensure that this is translated into a significant reduction in poverty." -APP