Study of the IMF: Comfortably met the performance standards for the end of September, says the chief of mission
The mission of the International Monetary Fund (IMF) and the local authorities reached an agreement on the first assessment under the Extended Fund Facility (EFF) for Pakistan after it was noted that the performance requirements “were met with comfortable margins” at the end of September.
Ernesto Ramirez Rigo
During the visit of an IMF mission led by Ernesto Ramirez Rigo from October 28 to November 8 to Islamabad, the two sides reached an agreement, according to a press release issued by the mission on Friday. Meetings with PM and the economic team of the government, provincial governments, and other stakeholders took place during this period.
Based on its preliminary findings, the IMF mission will prepare a document that will be submitted to the IMF’s Executive Board for consultation and decision-making, subject to management approval.
All performance requirements are met at the end of September with comfortable margins and progress toward reaching all institutional targets continues
the mission said in its release, also tweeted by Federal Minister of Economic Affairs Hammad Azhar.
According to the report, the policies of the government have started to bear fruit, helping to reverse risk accumulation and restore economic stability.
“External and fiscal deficits are shrinking, inflation is expected to decline, and growth remains optimistic, albeit sluggish,” read the statement.
Sustaining sound policies and promoting structural reforms remain key priorities for improving resilience and paving the way for stronger and more sustainable growth. “At the end of the visit, Rigo, the mission chief, announced that the agreement was reached.
“Pakistani authorities and IMF staff have reached an agreement on policies and reforms needed to complete the first assessment under the EFF. IMF management and the Executive Board of Directors support the agreement,” he said.
He added that the completion of the review would allow SDR 328 million (or about US$ 450 million) to be disbursed and will help unlock substantial funding from bilateral and multilateral partners.
“In a challenging environment, the execution of the system was successful and all success requirements were met with reasonable margins at the end of September.
Speaking of anti-terrorism financing initiatives and money laundering, he said, “Significant progress has been made in strengthening the AML / CFT system, but more work is needed before March 2020. International partners remain committed to supporting the reform efforts of the authorities, providing the necessary funding guarantees.”
“On the macroeconomic side, signs that economic stability is slowly taking hold are increasingly increasing,” said Rigo. The mission chief said the external situation is improving, underpinned by an orderly transition from the State Bank of Pakistan (SBP) to a stable, market-determined exchange rate and a higher than expected increase in net foreign reserves of SBP.
“Budgetary revenue collections are increasing as a result of efforts on tax administration and policy changes and given the continuing contraction of import-related taxes. Inflation pressures are expected to recede in the near future, indicating an acceptable monetary stance. Importantly, steps are being introduced to improve the social security network and development spending is being prioritized.”
Speaking of the country’s macroeconomic outlook, he said, “The near-term macroeconomic outlook is largely unchanged from the time of program approval, with development steadily improving and average inflation projected to decline to 11.8% in FY2020. Domestic and international threats exist, however, and economic systemic problems remain.
“High and stable growth has been achieved through discussions on policies to help Pakistan. Fiscal prudence must be preserved in order to reduce fiscal vulnerabilities, including by carefully implementing the FY 20 budget, enforcing the new legislation on public finances, and continuing to expand the tax base by eliminating preferential tax provisions and exemptions, while preserving critical social protection and development spending,” he added.