IMF links decisive action to programme success

Updated September 21, 2019

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International Monetary Fund’s (IMF) Middle East and Central Asia Director Jihad Azour shaking hands with Adviser to the Prime Minister on Finance  Hafeez Shaikh ahead of a meeting in Islamabad. — PID/File
International Monetary Fund’s (IMF) Middle East and Central Asia Director Jihad Azour shaking hands with Adviser to the Prime Minister on Finance Hafeez Shaikh ahead of a meeting in Islamabad. — PID/File

ISLAMABAD: In a morale boost to the country’s economic managers, the International Monetary Fund (IMF) has acknowledged that the PTI government’s economic programme has made a promising start, and pushed for its “decisive implementation” to usher in stronger and sustainable growth.

Concluding its five-day visit here on a positive note, an IMF delegation, led by its director for Middle East and Central Asia Jihad Azour, said in a press release that the mission would return to Pakistan in late-October to formally conduct its first quarterly review of $6bn Extended Fund Facility (EFF) for the period ending this month.

“Pakistan’s economic programme is off to a promising start, but decisive implementation is critical to pave the way for stronger and sustainable growth,” said the mission in a statement warning that “domestic and international risks remain, and structural economic challenges persist”. Therefore, the authorities need to press ahead with their reform agenda.

Read: Reading the IMF programme

Expects inflation to decline in coming months

The statement said the mission, led by Ernesto Ramirez Rigo, visited Islamabad and Karachi from Sept 16 to 20 to take stock of economic developments since the start of the EFF and discuss progress in the implementation of economic policies. It said a full mission for the first review under the EFF was planned for late October.

The mission noted that the authorities’ economic reform programme was still in its early stages while acknowledging that there had been progress in some key areas. “The transition to a market-determined exchange rate has started to deliver positive results on the external balance, exchange rate volatility has diminished, monetary policy is helping to control inflation, and the SBP [State Bank of Pakistan] has improved its foreign exchange buffers”.

It also noted “a significant improvement” in tax revenue collections, with taxes showing double-digit growth net of exporters’ refunds.

Moreover, the Federal Board of Revenue is undertaking significant steps to improve tax administration and its interface with taxpayers.

The staff and the authorities have analysed the worse than expected fiscal results of FY2018/19, which were partially result of one-off factors and should not jeopardise the ambitious targets for this fiscal year. Importantly, the social spending measures in the programme have been implemented.

The IMF mission said the near-term macroeconomic outlook was broadly unchanged from the time of the programme approval, with growth projected at 2.4 per cent in FY2019/20, inflation expected to decline in the coming months, and the current account adjusting more rapidly than anticipated.

It said the end-of-mission statement covered preliminary findings after a visit by the staff to a country and did not necessarily represent the views of IMF executive board nor would this result in a board discussion.

Meanwhile, the power division has said in a statement the IMF mission chief also appreciated its efforts to meet targets.

According to the statement, the mission had a meeting with Energy Minister Omar Ayub Khan and Power Secretary Irfan Ali where it was told about “historic achievements” in record recoveries and reduction in line losses.

The mission was informed that circular debt had shown considerable reduction in its growth. It had been growing with the volume of Rs38 billion per month, but in eight months its growth at the end of last financial year was reduced to Rs26bn per month. In July the results were even encouraging as the growth further fell to Rs18bn per month as a campaign against power theft and defaulters yielded results.

The mission was also told that in areas where hooks and power theft from lines was rampant, aerial bundled cables were being installed by the power distribution companies, while in areas where the problem was more sophisticated -- like major urban areas – smart meters were in execution and “80pc of total feeders in the country” had been “exempted from load management”. The mission chief appreciated encouraging results, the statement said.

Published in Dawn, September 21st, 2019