WASHINGTON: Senior managers of the Pakistani economy engaged with the officials of the World Bank and the International Monetary Fund (IMF) in Washington this week, exchanging views on plans for an economic recovery.

The group included Dr Abdul Hafeez Shaikh, Adviser to the Prime Minister on Finance and Revenue and Dr Reza Baqir, Governor State Bank of Pakistan.

A government press release said that the Pakistani officials spoke at length with the members of World Bank-IMF Pakistan Staff Association and heard their suggestions for reforming the economy.

They also spoke at an event “Pakistan: This Time it’s Different” hosted by Masood Ahmed, President Centre for Global Development (CGD), which was attended by a cross section of individuals from the think-tanks, government, academia and Pakistani diaspora.

A CGD statement noted that “faced with a deepening financial crisis, the recently elected government of Imran Khan has embarked on an ambitious economic reform programme,” and this programme is supported by a $6 billion IMF loan and $32bn of associated financing.

The statement, however, warned that “Pakistan has a long history of embarking on such reforms but not of seeing them through.”

A recent IMF statement says that Pakistan has been facing long-standing economic challenges, including low revenue mobilisation, high fiscal deficit and indebtedness, low spending on education, health, and social programs, and a weak external position.

The IMF believes that the situation “reflects the legacy of uneven and pro-cyclical economic policies in recent years,” which aimed to boost growth, but at the expense of rising vulnerabilities and lingering structural and institutional weaknesses.

The IMF, however, also notes that the Pakistani authorities have “already started implementing difficult but necessary measures” aimed at helping Pakistan revive its economy and create the foundation for lasting change and inclusive growth.

The IMF believes that such policy reforms and measures “mark a positive and significant turning point in Pakistan’s economic prospects for the population at large.”

The statement urged Pakistan to strengthen their efforts because “decisive policies and reforms, together with significant external financing are necessary to reduce vulnerabilities faster, increase confidence, and put the economy back on a sustainable growth path, with stronger private sector activity and job creation.”

The IMF has also suggested specific policy actions that it wants Pakistan to undertake.

The suggested measures include the adoption of a market determined exchange rate that will help the functioning of the financial sector and contribute to a better resource allocation in the economy.

The IMF reminds Pakistan that a comprehensive plan for cost-recovery in the energy sectors and state-owned enterprises will help eliminate or reduce the quasi-fiscal deficit that drains scarce government resources. This will free up resources for spending in priority areas such as health, education, human capital development and reducing poverty.

Another measure suggest improving public finances and reducing public debt through tax reforms to strengthen revenue mobilisation and ensure a more equal and transparent distribution of the tax burden.

“Provinces are committed to contribute to these efforts by better aligning their fiscal objectives with those of the federal government,” the IMF notes.

Published in Dawn, July 26th, 2019