ISLAMABAD: Under the International Monetary Fund (IMF) programme Pakistan’s economy has achieved its targets for economic stability, a report released by the Institute for Policy Reforms (IPR) said on Monday.

“Economy needs structural changes,” IPR’s half-yearly July-Dec 2015-16 review said.

The report stated the entire focus of policy makers at present seemed to be on balance of payments and fiscal deficit.

“With a substantial provincial surplus, fiscal deficit for the period July-December 2015 was 1.7 per cent. This is well within the target for the year. Revenue collection and expenditure are largely on track. The latter especially because half-year public sector development spending was about one quarter of the budget”, the report said.

The report further said the rate of inflation has dropped. For the period July 2015 to Feb 2016, year on year CPI fell, though it was above the lowest point of September 2015.

It added that “growth during July-December 2015 has been slow. Against its annual target of 6pc, Large Scale Manufacturing grew year on year by 3.9pc during July-December 2015”.

The report further said that in agriculture, production of cotton and rice, two major crops, fell. This year, cotton lost about a third of its previous year production. Sugarcane production may increase from last year’s low, but will be short of the target 68 million tonnes.

The report added that credit to the private sector and import of machinery has increased.

It also emphasised that while it focuses on stability, the government must concurrently begin structural reforms of the economy.

This was critical if the country was to break out of the low growth trap and continued dependence on external savings, it added.

The report noted that for ‘too long policy makers in Pakistan have relied only on management of macroeconomic indicators’.

It is time for strong action on reforms, it suggested.

“Even within stabilisation, they must aim for quantum growth in tax revenues. Successive governments have been unable to persuade important constituencies to pay taxes,” it said.

The report counsels the government to avoid cuts on development expenditure and refer to other issues with the PSDP.

“The government must take steps to boost business activity. Revival of industry and agriculture needs a mix of policy, governance, and public investment support. Access to project finance for the private sector is key,” the report observed.

Published in Dawn, March 15th, 2016