October 9, 2018 (MLN): The International Monetary Fund (IMF) believes that while Pak-China collaboration on the China-Pakistan Economic Corridor (CPEC) is set to bring about definite potential benefits for Pakistan, the venture encloses some risks as well.
At the October 2018 World Economic Outlook press conference held earlier this morning, Maury Obstfeld, Economic Counsellor and Director of the Research Department said that Pakistan needs more infrastructure and CPEC is a source of infrastructure and connectivity for the country, but it is also important that the design and governance of projects is sound.
He added that excessive debts which cannot be repaid must be avoided because that just leads to financial instability and to lower growth.
On the subject of challenges facing Pakistan’s economy and its ability to finance itself, Mr. Obstfeld said that “Pakistan is suffering from a number of imbalances: A very large fiscal imbalance. A large current account imbalance. They also have a low level of reserves and a currency that is too rigid and overvalued. As a result, they are having financing gaps.”
He apprised that as of now, the Fund has not been approached formally by the Pakistani government but when and if the country seeks their help, they will be listening into it very attentively, having said that as with any member in good standing, Pakistan is certainly entitled to request financial support from the Fund.
Mr. Obstfeld told the press that the Pakistani government has expressed a desire to enact deep structural reforms that might break the cycle of Pakistan needing financial support from the Fund. “Frequently, they have had programs in the past several times. And, you know, that is a very good sign going forward,” he stated.
Speaking on Pakistan’s placement in Financial Action Task Force (FATF)’s grey list and their efforts to make their way out of it, Obstfeld took an optimistic stance, pressing that Pakistan is a country with immense potential and its government seems to have a good idea, on making durable progress. He pointed out that “our job at the Fund through our surveillance, through our capacity development is to help our members try to attain their potential.”
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