WASHINGTON: Prudent monetary and fiscal policies and strong capital inflows have helped Pakistan improve its economy, says the International Monetary Fund (IMF).

In a statement issued in Washington on Wednesday afternoon, the IMF also credited robust remittance from overseas Pakistanis and lower oil prices for the improvement.

“The authorities have made progress with consolidating macroeconomic stability, strengthening public finances and rebuilding foreign-exchange buffers,” Masood Ahmed, director of the IMF’s Middle East and Central Asia department, said in a statement following a recent visit to Islamabad and Lahore.

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As a result, economic growth was strengthening and inflation was slowing, he added.

The State Bank of Pakistan slashed its key interest rate in January by a full percentage point, to 8.5 per cent. January’s interest-rate cut came after a half-percentage point easing in November.

Mr Ahmed urged Islamabad to further bolster revenue by broadening the tax base and improving compliance, as it would allow the government to further reduce public debt while increasing spending in key areas such as health and education.

The IMF official advised the government to address longstanding imbalances in the energy sector as its top priority. Other priorities he suggested included: restructuring and privatising public-sector enterprises, improving investment-climate and trade reforms as well as continuing with financial-sector reforms.

Mr Ahmed visited Islamabad and Lahore from March 6-9, for meetings with Prime Minister Nawaz Sharif, Finance Minister Muhammad Ishaq Dar, and State Bank Governor Ashraf Wathra.

“Pakistan’s economy is improving, helped by prudent monetary and fiscal policies, strong capital inflows, robust remittances, and lower international oil prices,” he said.

Mr Ahmed said that the current improved economic and financial situation presented “a unique opportunity for Pakistan to reinforce and build on recent stability gains to work towards achieving higher, sustainable and inclusive economic growth”.

He advised the government to further build up the country’s international reserves, which would strengthen Pakistan’s financial resilience while supporting exports.

The IMF official also urged the government to stem the accumulation of arrears on a priority basis.

Mr Ahmed observed that it would also “be critical to protect the most vulnerable from the direct and indirect impacts of economic reforms through continued expansion of targeted social assistance”.

The official assured the government that the IMF would remain fully committed to supporting its efforts through financing, policy advice and technical assistance, including through the ongoing Extended Fund Facility arrangement.

Published in Dawn, March 13th, 2015

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