Pakistan needs to carry out essential reforms: Daban Sanchez

IMF official says lack of consistent policies has sparked challenges

LAHORE: Pakistan is in a challenging economic state of affairs and it will have to carry out essential reforms in order to bring a drastic change, remarked International Monetary Fund (IMF) Resident Representative Teresa Daban Sanchez.

In a meeting with Lahore Chamber of Commerce and Industry (LCCI) President Almas Hyder, she pointed out that lack of consistent policies sparked challenges and more was needed to be done.

“Pakistan needs to enhance its tax-to-GDP ratio and social spending, which are relatively low,” she said. “There are gaps also that must be eliminated.”

Speaking on the occasion, Hyder stressed that no economy could grow in suffocation, therefore, the IMF should not set tough conditions.

Negotiations inching towards finalising IMF programme: Daban

He suggested that the IMF and the government should take a pragmatic approach and they should keep in view the ground realities and economic scenario of Pakistan.

“Pakistan has been one of the most frequent users of IMF programmes, which have resulted in currency devaluation, excessive inflation, cuts in public expenditure and hikes in interest rate,” he pointed out.

Hyder added that ever since talks began on going to the IMF, Pakistan’s currency had seen a massive devaluation. He noted that there had been a devaluation of around 29% since August 2018 and 13% since May 2019. Hyder was of the view that elasticity of exports and imports in Pakistan was less than one and because of that the devaluation did not help enhance exports and caused confusion in the private sector about the extent of government interference to stabilise the exchange rate.

“In this scenario, future planning is difficult,” he said. “Leaving the exchange rate on market forces will have negative repercussions for the economy.”



There was a perception that the inflation rate would rise further in the next financial year, which meant there would be more devaluation and hike in interest rate, the LCCI president said.

He pointed out that the rise in mark-up meant no investment and expansion of industries, adding that the hike in interest rate by next year would push up borrowing cost by around 18-20%, which would impact investment, capacity generation and exports.

He mentioned that during the economic recession in the US, the public-sector spending rose and interest rate was lowered. The meeting particularly focused on the economy of Pakistan, revenue collection, inflation, mark-up, trade deficit, agriculture and various other areas.

Published in The Express Tribune, August 2^nd, 2019.

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