Not a bad start

The International Monetary Fund (IMF) has acknowledged the promising start of the $6 billion Pakistan bailout programme, a deal struck by the  Pakistan Tehreek-e-Insaf (PTI) led government in May this year with the lender of last resort to salvage an economy under considerable strain, but said that ‘decisive implementation’ was critical to its success.

At the conclusion of its country visit, the IMF gave Islamabad a pat on the back but stopped short of issuing a downright clean bill of health. It has kept the low economic growth rate outlook and ‘ambitious’ fiscal targets unaltered at the end of the first year of the Imran Khan-led government. IMF Mission chief to Pakistan, Ernesto Ramirez Rigo noted: ‘The near-term macroeconomic outlook is broadly unchanged from the time of the programme approval, with growth projected at 2.4 per cent in the fiscal year 2019-20.’ The 2.4% economic growth rate is lower than the 3.5% projection of the State Bank and is also equal to the county’s population growth. The IMF Mission chief also said that the inflation was expected to decline in the coming months, while the current account was adjusting more rapidly than anticipated. In its staff level report, the IMF has projected 13% inflation rate for this fiscal year, although its press release was silent on the inflation number.

While discussing the possibility of resetting the over-ambitious targets, the IMF once again ruled out any change in the primary budget deficit and revenue collection targets. The IMF mission had visited Islamabad and Karachi from September 16-20 to take stock of economic developments since the start of the Extended Fund Facility (EFF) and discuss progress in the implementation of economic policies. The stigma of requiring support from the Fund, with its attendant conditions, means it is a politically difficult option in many countries, but none more so than in Pakistan. The government, nevertheless, swallowed the bitter pill. Let us see how things pan out.

Published in The Express Tribune, September 23^rd, 2019.

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