Daily Times

ISLAMABAD: Despite the significant fiscal consolidation achieved by Pakistan under the three-year IMF programme, Pakistan has to bring reforms in reinforcing economy, raising growth and making growth more inclusive.

International Monetary Fund (IMF) Managing Director (MD) Christine Lagarde in a seminar “Emerging Markets in the World Economy”.

She said Pakistan has made significant economic progress in three years, public finances have improved considerably, external reserve buffers have been rebuilt, and growth has been gradually strengthening.

The government has made efforts on reducing the circular debt. Improvement in revenue collection by 2½ percent of GDP over the past three years is a welcoming sign as well, she added.

“Pakistan needs to rely on the strength of its own policies to generate more growth and jobs and to join the group of dynamic emerging markets,” she added.

She said that this is an important time- “a moment of opportunity”-for Pakistan, a country undergoing an economic transformation that can place it well among the ranks of emerging market economies.

IMF forecasts for world growth are 3.1 percent this year and 3.4 percent next year-well below the 3.7 percent average for nearly two decades before the 2008 financial crisis. Underlying this picture is a complex set of factors. The emerging market group will continue to grow-at 4.2 percent this year and 4.6 percent next year.

She added that China is now among the top 10 trading partners for over 100 economies that account for about 80 percent of the world GDP as China moved up the value added chain, it will reduce its production of some labour-intensive goods. This is an opportunity for countries such as Pakistan, but Pakistan will need to retool its economy and train its people to realise this advantage.

She said despite the significant fiscal consolidation achieved under the programme, public debt remains high at about Rs 19 trillion or 65 percent of GDP. This debt needs to be serviced and, at current levels, the interest bill is larger than Pakistan’s entire development budget. To place debt on a downward trajectory, action is needed on both revenue and expenditures.

On the revenue side, despite the marked improvements over the IMF-supported programme, Pakistan today still only collects little more than half of what is estimated as a feasible amount. This means continued efforts are needed to bring more people into the tax net and ensure that all pay their fair share.

Private investment in Pakistan today accounts for only 10 percent of the economy. In emerging markets however, the average is about 18 percent. Pakistan’s exports are about 10 percent of GDP; emerging markets’ exports are nearly four times as high, she added.

She highlighted that education is crucial, especially in Pakistan where youth comprise about 60 percent of the population.

Currently, education outcomes in Pakistan remain weak. One out of every 12 children in the world that does not attend school lives in Pakistan.

“I am aware that access to education is a key concern for the Pakistani citizen, a point brought across when I met with Malala Yousufzai,” she said.

Beyond education, there is also a need to improve women’s participation in the economy. Closing gender gaps in economic participation could boost GDP by up to a third. These gains are non-trivial. Women can be a game-changer for Pakistan.

She said, “Although the programme has ended, our partnership will continue. We have been a partner with Pakistan for over 65 years, and we will remain closely engaged through policy dialogue and capacity building programmes, as you implement necessary reforms and strengthen your institutions.”

Earlier, Finance Minister Ishaq Dar gave an overview of the economy and welcoming the IMF MD said that her visit to Pakistan was an acknowledgement of the economic reform agenda undertaken by the government during the last three years during which Pakistan has moved to the macro-economic stability road from a position of instability, which prevailed in 2013.

Pakistan’s economy continues to maintain its growth momentum above 4 percent for the third year in a row with real GDP growing at 4.71 percent in FY 2016, which is the highest in eight years. Inflation has been brought down to single digit at 2.86 percent in FY 2016, the lowest in decades. Prudent fiscal and effective monetary policies, coupled with regular monitoring of prices both at federal and provincial level, along with decline in international commodities and fuel prices, has helped in containing inflation. The present government also passed on the benefits of reduction in international oil prices to consumers.