Reforms vital for success: IMF
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WASHINGTON: Pakistan has succeeded in stabilising its economy, but steady implementation of reforms will be vital if the country hopes to find a place among the world’s fast-growing emerging markets, the International Monetary Fund (IMF) said on Tuesday.
Jeffrey Franks, the IMF’s outgoing mission chief for Pakistan, said: “The economy grew about 4 per cent last year, and we’re expecting a similar figure this year. That’s a good performance considering the country was carrying out major fiscal consolidation.”
“But it’s not enough to substantially improve income levels because of the high population growth rate,” he added.
Last week, the Fund approved the latest disbursement ($501 million) under a 36-month IMF-supported loan programme based on “the solid progress made to date on Pakistan’s economic reform agenda.”
In an interview released by the IMF, Mr Franks discussed Pakistan’s achievements at the programme’s halfway mark.
He said that when Pakistan approached the IMF for support in 2013, it was on the verge of a balance-of-payments crisis, and that crisis had been averted.
Reserves at the State Bank, which had declined to perilously low levels, are now rebounding. He also noted that the fiscal deficit, which was extremely large at over 8pc of GDP in 2012-13, is on track this year to get down below 5pc of GDP.
Mr Franks noted that the country is tackling costly and inefficient electricity subsidies, which came down from almost 2pc of GDP to 0.7pc this year, and they are expected to fall to 0.3pc next year.
The IMF official also appreciated the progress in improving the tax system.
“Pakistan has these so-called Statutory Regulatory Orders, or SROs, which grant tax exemptions and concessions, riddling the tax system with loopholes,” he said.
At the beginning of this fiscal year, the government eliminated a significant number of those SROs, and it is expected to improve tax collection from that source by about 0.3pc of GDP this year. Another batch of SROs will be eliminated in the upcoming budget for a similar amount, he added.
Published in Dawn, April 8th, 2015
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