Daily Times

KARACHI: Significant challenges remain for Pakistan in the post-Extended Fund Facility (EFF) programme period, said Mitsuhiro Furusawa, deputy managing director and acting chairman, International Monetary Fund (IMF)

“Authorities’ commitment to continue implementing strong policies to reinforce macroeconomic stability gains and advance growth-supporting reforms is to be commended.”

This was noted in the executive board of the International Monetary Fund (IMF), which completed on Wednesday the 12th and final review of an extended fund facility for Pakistan, enabling immediate disbursement of the final tranche of about $102.1 million. The arrangement allowed the IMF to oversee Pakistan’s three-year economic reforms programme supported by the extended fund facility.

The executive board had on September 4, 2013 approved the 36-month extended arrangement under the EFF of about $6.15 billion, or 216 percent of Pakistan’s current quota at the IMF.

Furusawa said Pakistan’s fund-supported programme had helped the country restore macroeconomic stability, reduce vulnerabilities and make progress in tackling key structural challenges. “Economic growth has gradually increased and inflation has declined. External buffers have been bolstered, financial sector resilience has been reinforced and the fiscal deficit has been reduced, while social safety nets have been strengthened.”

“Steps have been taken to strengthen the State Bank of Pakistan’s autonomy. Energy sector reform allowed a reduction of power outages, energy subsidies and accumulation of power sector arrears,” he added.

In light of the significant public debt burden, the authorities’ plan to further reduce the fiscal deficit is welcome, he said, adding that the current fiscal budget and the revised fiscal responsibility framework can anchor fiscal policy in support of further gradual fiscal consolidation.

“Further accumulating international reserves in a context of sufficient exchange rate flexibility will help strengthen confidence and competitiveness, while maintaining a prudent monetary policy stance will be key to supporting low inflation and macroeconomic stability. Swiftly addressing the remaining recommendations of the 2013 Safeguards Assessment is needed to further strengthen the central bank’s autonomy. Further progress in advancing financial sector reforms will be important.”

Furusawa said restructuring and attracting private sector participation in public enterprises was needed to ensure their financial viability and reduce fiscal costs. “Completing the power sector reform will be important to strengthen the soundness of the sector and support growth. Continuing to move forward with the implementation of the new business climate reform strategy will help increase competitiveness, foster investment, and support private-sector-led growth and job creation.”

“Close Fund engagement with Pakistan will continue through policy dialogue in the context of regular consultations and post-programme monitoring, along with ongoing technical assistance.”