KARACHI: Downside risks for the Pakistani economy remain exceptionally high, the International Monetary Fund (IMF) said on Friday, in its staff report on the country, ahead of talks with the fund on a longer term progamme.
An International Monetary Fund mission is expected to visit
Pakistan this month to discuss a new programme, ahead of
Islamabad beginning its annual budget-making process for the
next financial year.
“Downside risks remain exceptionally high. While the new
government has indicated its intention to continue the SBA’s
policies, political uncertainty remains significant,” said the
fund in its staff report following the second and final review
under the standby arrangement (SBA).
Pakistan needs drastic policy changes to turn around ailing economy
The fund added that political complexities and high cost of living could weigh on policy, adding that policy slippages, together with lower external financing, could undermine the narrow path to debt sustainability and place pressure on the exchange rate.
The IMF also said higher commodity prices and disruptions to
shipping, or tighter global financial conditions, would also
adversely affect external stability for the cash-strapped
nation.
The fund stressed the need for timely post-program external
financing disbursements.
Pakistan last month completed a short-term $3 billion programme, which helped stave off sovereign default, but the
government of Prime Minister Shehbaz Sharif has stressed the
need for a fresh, longer term programme.
Pakistan narrowly averted default last summer, and its $350
billion economy has stabilised after the completion of the last
IMF programme, with inflation coming down to around 17% in April from a record high 38% last May.
It is still dealing with a high fiscal shortfall and while it has controlled its external account deficit through import control mechanisms, it has come at the expense of stagnating growth, which is expected to be around 2% this year compared to negative growth last year.
Pakistan is expected to seek at least $6 billion and request
additional financing from the Fund under the Resilience and
Sustainability Trust.
Read the full story at the Business Recorder - Latest News website.
