ISLAMABAD: International Monetary Fund (IMF) in its a latest report said on Wednesday that starting from a difficult position in 2013, Pakistan has made substantial progress in reducing near-term economic vulnerabilities.
“Economic growth gradually increased from 3.7 percent in fiscal year (FY) 2012/13 to 4.2 percent in FY2014/15”, the IMF latest report said.
IMF said that during the same period, efforts to reduce power subsidies and raise tax revenue have lowered the budget deficit from 8.4 to 5.4 percent of GDP, although part of this adjustment reflected clearance of quasi-fiscal liabilities in the energy sector in 2013.
It added that monetary and financial sector policies have remained prudent in recent years, and the banking system remains sound.
Inflation has declined significantly, helped in part by low international commodity prices.
The IMF further said that the external position has recently strengthened although medium-term vulnerabilities remain.
“Helped by low oil prices and strong remittances, the external current account deficit narrowed to one percent of GDP in FY2014/15 and foreign exchange reserves of the SBP have been rebuilt from 1.5 months of imports in FY2012/13 to 3.8 months of imports in September 2015”,the Fund said.
However, the IMF observed that foreign direct investment (FDI) fell by a half in FY2014/15, albeit with some recovery since, and exports have declined.
The IMF said that economy’s competitiveness has been hampered by security issues, a business climate that lags regional peers and a real effective exchange rate appreciation of 17 percent over the past two years.
“Long-standing structural impediments and a difficult security setting remain key obstacles to growth and investment”, the IMF said.
The IMF said that pervasive tax evasion combined with still prevalent tax exemptions and loss-making state-owned enterprises constrain the fiscal space for public investment and social spending.
