Economic reforms on track: IMF

Published December 21, 2019

ISLAMABAD: Pakistan’s economic reform is on track but faster progress is needed to improve the anti-money laundering and combating financing of terrorism (AML/CFT) framework, said IMF’s David Lipton in a statement released by the International Monetary Fund (IMF) on Friday.

The statement comes after the IMF’s executive board completed its first review of the country’s economic performance under the Extended Fund Facility (EFF). The IMF had in July approved a $6bn bailout package after the incumbent government initiated reforms to fix the ailing economy.

The completion of the review on Friday will allow government to draw second tranche of $452.4 million bringing the total disbursements under the EFF to $1.44bn.

Accompanying the press release, IMF’s Deputy Managing Director David Lipton also issued a statement noting that, “Pakistan’s programme is on track and has started to bear fruit. However, risks remain elevated.”

Raising concerns over the existing progress made on the AML/CFT framework, he said that “faster progress is needed to improve the AML/CFT framework, supported by technical assistance from the IMF and other capacity development providers.”

Approves second tranche of $452.4m after first review

The Financial Action Task Force (FATF) body is due to review progress made by Pakistan on the AML/CFT deficiencies in February, 2020. Lipton said that “swift adoption of all the necessary measures is needed to exit the FATF’s list of jurisdictions with AML/CFT deficiencies.”

The IMF, however, appreciated government’s steps to address the economic imbalances. He said that, “authorities are committed to sustaining the progress on fiscal adjustment to place debt on a downward path.

“The planned reforms include strengthening tax revenue mobilisation, including the elimination of tax exemptions and loopholes, and prudent expenditure policies,” he added. He also reiterated the need to expedite work on a comprehensive tax policy to ensure timely implementation.

Lipton also lauded the State Bank of Pakistan’s decision to implement flexible, market-determined exchange rate while adding that the decision remains essential to cushion the economy against external shocks and rebuild reserve buffers.

The central bank in initial phase of reforms let the rupee slide to record low in order to decrease the worsening impact on foreign exchange reserves. The depreciation led to a spike in the inflation rate forcing the SBP to raise rates to 13.25 per cent.

Lipton appreciated the government’s monetary stance remarking that it is “appropriately tight” and should only be eased once disinflation is firmly entrenched.

Taking note of the ballooning circular debt, he said that government has adopted a comprehensive plan to address the issue of arrears in the energy sector. But he warned that implementation of the plan will play a key role to “improve collection, reduce losses, and enhance governance. Timely and regular adjustment of energy tariffs will bring the sector in line with cost recovery.”

Published in Dawn, December 21st, 2019

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