ISLAMABAD: Interna­tional Monetary Fund head Christine Lagarde said on Monday that Pakistan was in a better financial position and out of economic crisis as the country’s economic gro­wth had gradually increased, fiscal deficit reduced and inflation continuously declined.

The head of the Washing­ton-based lending agency, who is on a first visit to Pakistan, called on Prime Minister Nawaz Sharif and lauded his efforts for steering the country out of multiple challenges and achieving macroeconomic stability in a short span of time, according to a statement issued by the PM Office.

Congratulating the PM on successfully completing the IMF programme, she said that the completion reflected positively on the country and viewed as a symbol of credibility and stability.

“It is a fantastic step in your journey that you have achieved a bet ter and solid economic position in a brief period of two years,” the statement quoted the IMF chief as telling the PM. “Pakistan is now in a better fiscal position and certainly out of economic crisis,” she said.

“She also appreciated the country’s strengthened soc­ial safety nets and tax policy and administration reforms,” the statement added.

Appreciating the IMF’s assistance for Pakistan’s economic recovery and macroeconomic stability, the PM told her that his government had achieved economic stability by pursuing a comprehensive reforms agenda.

He said that he was working hard to increase the economic growth, bring down expenditures, increase exports and reduce the cost of production for the industrial and agriculture sectors.


Warns against perceived corruption, high public debt


“We are successfully delivering on the major challenges of terrorism, economy and power shortages that we inherited from the previous governments,” he said, adding: “We have dismantled terrorists’ networks and even presently 200,000 troops are deployed in the northern part of our country to completely eliminate the menace of terrorism.”

On relations with Afgha­nistan, the PM emphasised that Pakistan was sincere about bringing stability to Afghanistan. “Peace and stability in Afghanistan would ensure peace in Pakis­tan and the region as well.”

Later, the IMF chief advised the government at a seminar to take advantage of ‘moment of opportunity’ to build Pakistan into a dyna­mic, vibrant and integrated emerging market that is able to create sustainable jobs and prosperity for all.

“Do not beg for light from the moon, obtain it from the spark within you,” she said at the seminar — “Emerging markets in the world economy” — organised by the State Bank of Pakistan.

Finance Minister Ishaq Dar and SBP Governor Ashraf Wathra also spoke.

Ms Lagarde said the hard work done and reforms carried out over the past three years started paying off and Pakistan was recently upgraded from a frontier economy to an emerging market in the MSCI index.But, she said, in the current global environment, Pakis­tan needed to rely on the strength of its policies to generate more growth and jobs and join dynamic emerging markets.

She also advised Pakistan to boost growth by improving the business climate by strengthening governance and enabling the private sector to thrive.

“Pakistan ranks 117 out of 168 countries in perceived corruption,” she said, adding that even if there was no corruption, the perception hindered the private sector-led growth.

“Although direct social and economic losses are difficult to measure, even a perception of corruption deters private investment and impedes efforts to promote sustainable and inclusive growth,” she said and called for increasing transparency and accountability and removing red tape.

The IMF chief also called for completion of energy sector reforms and added simplifying procedures to open new business, enforce contracts and pay taxes would go a long way in promoting growth because bringing Pakistan’s business climate to the Middle East and north Africa region could increase growth by 1.5 per cent every year.

She said despite significant fiscal consolidation in three years, Pakistan’s public debt remained high, at about Rs19 trillion, or 65pc of GDP.

“This debt needs to be serviced and, at current levels, the interest bill is larger than Pakistan’s entire development budget,” she said and called for action both on revenue and expenditure sides to place debt on a downward trajectory.

She said Pakistan made a marked improvement on the revenue side under the IMF programme; yet it still collected only “little more than half of what is estimated as a feasible amount”.

It meant continued efforts were needed to bring more people into the tax net and ensure that all pay their fair share, she added.

At the same time, reducing public enterprise losses could enable a scaling up of growth-enhancing investment in physical and human capital. Currently, these losses amount to more than two-thirds of what is spent on the BISP. “Imagine what you could do with that amount of extra resources”.

Ms Lagarde viewed that these reforms were important to reduce budget deficits and build sufficient buffers to protect the country against shocks that may come down the road. “In parallel, there is a need to continue strengthening social safety nets to protect the most vulnerable segments of society.”

She also called for promoting private investment, strengthening exports, and raising productivity.

Private investment in Pakistan today accounts for only 10pc of the economy. In emerging markets however, the average is about 18pc. Pakistan’s exports are about 10pc of GDP; emerging markets’ exports are nearly four times as high, she said.

The IMF chief said higher public investment in infrastructure and continuing support for projects like the China-Pakistan Economic Corridor would not only promote growth and job creation, but will also facilitate regional integration.

Published in Dawn October 25th, 2016

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