Pakistan refutes IMF report on ‘deteriorating economy’

ISLAMABAD: The International Monetary Fund released a report this week indicating risks Pakistan’s economic and financial outlook is facing, but the country has refuted the IMF assessment.

The IMF report was refuted by Miftah Ismail, an adviser to Prime Minister Shahid Khaqan Abbasi on Finance, Revenue and Economic Affairs, according to Bloomberg.

The adviser says plans to issue dollar bonds or Chinese-currency bonds haven’t been finalized

The IMF in a statement said the Pakistan’s economy faces continual “erosion” and its widening external and fiscal imbalances mean that “risks to Pakistan’s medium-term capacity to repay the fund have increased” since completion of a three-year $6.6 billion bailout program that ended in Sept. 2016.

Pakistan’s current-account deficit could reach 4.8 percent of gross domestic product in the year ending June, the IMF said.

“Given the growth of our economy, this growth will solve lot of problems. The fiscal deficit went up “last year we had lot of political upheaval — but we will bring it down to less than 5 percent. We’ll make sure, our current account deficit is under control, not more than 3 percent next year.”

While Pakistan’s economy is growing at its fastest rate in a decade — at around 5 percent — on the back of China’s Belt and Road initiative, it has also come under strain in the past year. The nation’s current account and trade deficits have widened as exports lag regional peers, while foreign-exchange reserves have dropped 27 percent to $12.3 billion in the past year.

The IMF board also asked the Pakistan government to strengthen the fiscal discipline. The projections of IMF over the current account and budget deficits put former finance minister Ishaq Dar’s all claims under question at time of announcing the government’s fifth budget in June last year.

With its latest prediction, the IMF said in the statement that Pakistan’s official gross foreign currency reserves could slip to $12.1 billion – barely enough to finance 10 weeks of imports.

The board has predicted that the country’s budget deficit likely to hit 5.5 percent of the GDP — almost Rs505bn or 1.4pc — higher than 4.1pc budgeted by the government.

With “rising external and fiscal financing needs and declining reserves, risks to Pakistan’s medium-term capacity to repay the Fund have increased since completion of the Extended Fund Facility (EFF) arrangement in September 2016”, noted the IMF in its handout released Wednesday morning.

However, It said Pakistan’s near-term outlook for economic growth is broadly favourable and real GDP growth is expected to grow by 5.6% in fiscal year 2017-18, supported by improved power supply, investment related to the China-Pakistan Economic Corridor (CPEC), strong consumption growth, and ongoing recovery in agriculture.