Pakistan out of economic crisis but needs to widen tax net, says IMF's Lagarde

Published October 24, 2016
International Monetary Fund Managing Director Christine Lagarde meets Prime Minister Nawaz Sharif at PM House. ─ PM Office
International Monetary Fund Managing Director Christine Lagarde meets Prime Minister Nawaz Sharif at PM House. ─ PM Office

International Monetary Fund (IMF) Managing Director (MD) Christine Lagarde in a meeting with Prime Minister Nawaz Sharif in Islamabad on Monday maintained Pakistan is now "certainly out of economic crisis", a PM Office statement said.

In the first such visit by an IMF head in several years, Lagarde lauded the prime minister on successfully completing the IMF programme and achieving macroeconomic stability during a short period of time.

Lagarde's two-day visit comes around two months after the international lender cleared payment to Pakistan of a final $102 million tranche in a $6.4 billion three-year programme.

"It is a fantastic step in your journey that you have achieved a better and solid economic position in a brief period of two years," she said, as quoted by the statement.

Completion of the IMF programme reflects very positively on Pakistan, she said.

‘Bring more people into the tax net’

The visiting IMF managing director, while speaking at a seminar later in the day, said: “Despite the marked improvements over the IMF-supported programme, Pakistan still only collects little more than half of what is estimated as a feasible amount [in taxes].”

“This means continued efforts are needed to bring more people into the tax net and ensure that all pay their fair share,” she maintained.

“Currently, these losses amount to more than two thirds of what is spent on the Benazir Income Support Programme. Imagine what you could do with that amount of extra resources.”

Lagarde depicted a bleak state of education in Pakistan saying one out of every 12 children in the world that does not attend school lives in Pakistan.

“I am aware that access to education is a key concern for the Pakistani citizen, a point brought across when I met with Malala Yousafzai,” she said.

“Beyond education, there is also a need to improve women’s participation in the economy,” Lagarde said, adding that “Closing gender gaps in economic participation could boost GDP by up to a third. These gains are non-trivial. Women can be a game-changer for Pakistan.”

Economic growth up, inflation down

The IMF MD said that economic growth has gradually increased, and the fiscal deficit has reduced while inflation has continuously declined in Pakistan. She also appreciated the country’s strengthened social safety nets and tax policy and administration reforms, according to PM Office.

In an oped penned by Lagarde for The News, the IMF MD focuses on four key priorities for Pakistan, including greater economic resilience, higher growth, quality of growth and belief in the global system.

The IMF officially endorses Pakistan’s economic recovery but has urged the country to continue key structural reforms if it wants to consolidate these gains.

The IMF says Pakistan's economic recovery has gradually strengthened and short-term vulnerabilities have further receded on the back of improved macroeconomic stability and progress on structural reforms.

It, however, maintains that the government should prioritise efforts to complete energy sector reforms.

Read more: IMF confirms gradual economic recovery, urges Pakistan to continue reforms

'Stability through reform'

Appreciating IMF’s assistance for Pakistan’s economic recovery and macroeconomic stability, Prime Minister Nawaz Sharif said that the present government has achieved economic stability by pursuing a comprehensive reforms agenda.

"We are successfully delivering on the major challenges of terrorism, economy and power shortages that we inherited from the previous governments," he said.

"We have dismantled the terrorists’ networks and even presently 200,000 troops are deployed in the northern part of our country to completely eliminate the menace of terrorism from our country. More than 24,000 precious human lives have been lost, about 50,000 wounded while our economy suffered a loss of $100 billion in this war against terrorism," the prime minister said.

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