IMF completes twelfth and final review mission to Pakistan

KARACHI: An International Monetary Fund (IMF) staff mission, led by Harald Finger, visited Dubai from July 26 – August 4, 2016 to conduct discussions on the twelfthand final review of Pakistan’s economic program supported by a three-year IMF Extended Fund Facility (EFF) arrangement.

The staff team met with Finance Minister Ishaq Dar, State Bank of Pakistan (SBP) Governor Ashraf Wathra, and other senior officials.

At the conclusion of the mission, Mr. Finger issued the following statement:

“After productive discussions, the mission and the Pakistani authorities have reached staff-level agreement on the completion of the twelfth and final review under the EFF arrangement. The agreement is subject to approval by the IMF Management and the Executive Board. Upon completion of this review, SDR 73 million (about US$102 million) will be made available to Pakistan.

“Growth is expected to reach 5 percent in FY 2016/17, supported by buoyant construction activity, strengthened private sector credit growth, and an investment upturn related to the China Pakistan Economic Corridor (CPEC). Nevertheless, a challenging global environment and declining exports are weighing on growth prospects. Average inflation is expected at around 5.2 percent in FY 2016/17, remaining well-anchored by continued prudent monetary policy. Gross international reserves reached US$18.1 billion at end-June 2016, covering over four months of prospective imports.

“Program performance in the fourth quarter of FY2015/16 has been solid. Most end-June 2016 quantitative performance criteria (PCs) were met, although the ceilings on the budget deficit and net domestic assets (NDA) of the State Bank of Pakistan (SBP) were exceeded by small margins. We welcome the authorities’ commitment to take remedial actions in these areas. All indicative targets and structural benchmarks (SB) were met, except for the delayed notification of multi-year tariffs for three power distribution companies.

“In the course of the IMF-supported program, Pakistan’s economy has made significant progress toward strengthening macroeconomic and financial stability and resilience, and laying foundations for higher, more sustainable, and inclusive growth. Growth gradually accelerated, international reserve buffers have been rebuilt, and the budget deficit narrowed significantly, helped by sizeable growth in tax revenue. Inflation declined, helped by lower oil prices and improved monetary and fiscal policies. Regulatory reforms and improved energy sector performance have slowed the accumulation of arrears and begun to reduce outages. Coverage under the Benazir Income Support Program (BISP) has expanded, and stipends increased by over 60 percent. Regulations to fight money-laundering and financing of terrorism have been strengthened. Despite some delays, the authorities continue to advance in their work toward restructuring and divesting ailing public sector enterprises (PSEs).

“To consolidate and reinforce the gains achieved in the last three years, the economic reform agenda needs to continue after the program ends. In this context, it will be important to further strengthen public finances and external buffers, broaden the tax net, improve public financial management, strengthen the monetary policy framework, address losses in PSEs, complete the energy sector reforms, and accelerate competitiveness-enhancing improvements of the business climate, including the trade regime. Continued progress with these reforms will be critical to reinforce the authorities’ achievements under this IMF-supported program.

“The mission thanks the authorities and technical staff for the constructive dialogue over the past three years. The IMF reaffirms its ongoing support for Pakistan, including through continued policy dialogue and technical assistance.”

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