Inflation expected to decline as current account deficit adjusts rapidly: IMF

 

ISLAMABAD: The International Monetary Fund (IMF) on Friday said Pakistan’s economic program is off to a promising start, but decisive implementation is critical to paving the way for stronger and sustainable growth.

An IMF mission, led by Ernesto Ramirez Rigo, visited Islamabad and Karachi during September 16–20, 2019 to take stock of economic developments since the start of the Extended Fund Facility (EFF) and discuss progress in the implementation of economic policies.

“While the authorities’ economic reform program is still in its early stages, there has 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 has improved its foreign exchange buffers,” a press release read.

It added that there has been a significant improvement in tax revenue collections, with taxes showing double-digit growth net of exporters’ refunds. “The Federal Bureau of Revenue (FBR) is undertaking significant steps to improve tax administration and its interface with taxpayers. Staff and the authorities have analyzed the worse than expected fiscal results of FY2018/19, which were partially the result of one-off factors and should not jeopardize the ambitious fiscal targets for FY2019/20. Importantly, the social spending measures in the program have been implemented.”

The monetary watchdog added, the near-term macroeconomic outlook is broadly unchanged from the time of the program 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.

“However, domestic and international risks remain, and structural economic challenges persist. In this context, the authorities need to press ahead with their reform agenda,” it said.

An IMF staff team will return to Pakistan in late October to assess the end-September program targets.