July 13, 2023 (MLN): The International Monetary Fund (IMF) supports the recent increase in the policy rate to 22% and urges the authorities to maintain a continued tight, proactive, and data-driven monetary policy going forward, Kristalina Georgieva, managing director and chair IMF stated in the Executive Board discussion.
Moreover, a market-determined exchange rate is also critical to absorbing external shocks, reducing external imbalances, and restoring growth, competitiveness, and buffers.
Close oversight of the banking system and decisive action to address undercapitalized financial institutions would support financial stability, she added.
The International New Stand-By Arrangement, implemented faithfully, offers Pakistan an opportunity to regain macroeconomic stability and address these imbalances through consistent policy implementation.”
Pakistan’s economy was hit hard by significant shocks last year, notably the spillovers from the severe impacts of floods, the large volatility in commodity prices, and the tightening of external and domestic financing conditions.
These factors together with uneven policy implementation under the EFF combined to halt the post-pandemic recovery, sharply increase inflation, and significantly depleted internal and external buffers, she further noted.
The authorities’ new Stand-By Arrangement, implemented faithfully, offers Pakistan an opportunity to regain macroeconomic stability and address these imbalances through consistent policy implementation.”
The authorities’ FY24 budget, which targets a modest primary surplus, is a welcome step toward fiscal stabilization.
She said that the anticipated improvement in tax revenues is critical to strengthen public finances and eventually create the fiscal space needed to bolster social and development spending.
Maintaining discipline over non-critical primary expenditure will be essential to support budget execution within the envisaged envelope.
In parallel, the authorities urgently need to strengthen energy sector viability by aligning tariffs with costs, reforming the sector's cost base, and better targeting power subsidies.
Looking beyond this fiscal year, enhanced efforts to expand the tax base and improve public financial management, including in the delivery of quality infrastructure, are needed and increase progressivity and efficiency.
Accelerating structural reforms to build climate resilience, enhance safety nets, strengthen governance, including state-owned enterprises, and improve the business environment by creating a level playing field for investment and trade are necessary for job creation and raising inclusive growth.
To note, the State Bank of Pakistan (SBP) has received the first installment of $1.2 billion from the International Monetary Fund (IMF) today.
While the remaining $1.8bn will be received after 2 reviews, in November of this year and February 2024.
This inflow comes on top of a $1bn deposit from the United Arab Emirates (UAE) yesterday, and a $2bn deposit from Saudi Arabia on Tuesday.
Copyright Mettis Link News
Posted on: 2023-07-13T15:20:00+05:00
