IMF’s positive outlook

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IN a morale boost to the country’s economic managers, the International Monetary Fund (IMF) has acknowledged that the PTI government’s economic reforms programme has made a promising start. Concluding its five-day visit here on a positive note, an IMF delegation, led by its director for Middle East and Central Asia Jihad Azour said in a statement the transition to a market-determined exchange rate has started to deliver positive results on the external balance, exchange rate volatility has diminished, monetary policy is helping to control inflation, and the SBP has improved its foreign exchange buffers. It also noted a significant improvement in tax revenue collections, with taxes showing double-digit growth net of exporters’ refunds.
When present government came into power, the country was faced with worst economic crisis. In fact the country was close to default because of widening current account deficit. The financial assistance from friendly countries including China, Saudi Arabia, UAE and Qatar helped the government avert the disaster. But it really goes to the credit of PTI government for taking some real painful and political unpopular decisions to put the economy on the right path. Reforms in power sector are really paying off as the volume of monthly circular debt stands significantly reduced. Nonetheless, as stated by the IMF, decisive implementation of the reforms programme is critical to pave the way for stronger and sustainable economic growth. The government is still faced with the issue of budget deficit which had reportedly escalated to 8.9 percent on June 30, 2019. In our view, efforts should be expedited towards privatizing or reviving the loss making state owned enterprises especially PIA and Pakistan Steel Mills. Then as inflation has been anticipated to dip in the coming months, the SBP should cut the policy interest rate as the current one is not suitable to generate economic activity and attract investment. Major focus should be given to the development of agriculture sector on modern lines and provision of relief to farmers as well as revival of industries as only through significantly bolstering exports and tax collection, the country can address its economic woes and move towards achieving sustainable economic growth.