Teresa Daban Sanchez, the Country Representative of the International Monetary Fund (IMF) for Pakistan said on Wednesday that Pakistan is all set to achieve its fiscal sustainability and other major goals under the Extended Fund Facility (EFF).
Speaking at the Sustainable Development Policy Institute (SDPI) webinar she said that Pakistan is doing this by removing tax exemptions and privileges, enhancing social and productive spending, eliminating quasi-fiscal circular debt, federal-provincial coordination, and cutting the losses of public enterprises.
According to her, these goals are important as they set the future direction of the country. These goals include introducing a flexible exchange rate and introducing autonomy to the state bank of Pakistan with a change in the primary objective of the central bank.
She added that the strengthening of the social safety net to protect the marginalized community of the country is the most important thing for Pakistan along with the reformation of the country’s institutions.
The IMF representative said that the country’s economy in the pre-Covid era was on track to reach a 2.4 percent growth rate till March 2020. However, after the onset of the pandemic, the economy witnessed a decline of 1.5 percent as resources were diverted to fight the pandemic and containment.
She mentioned the fact that to mitigate the impact of the pandemic, Pakistan received $1.4 billion worth of funds from IMF in April 2020, and from other International Governmental Organizations like World Bank and ADB.
She reiterated the IMF figures of 1.5 percent GDP growth for the country, however, according to her the inflation will remain a trigger. “The monetary policy is accommodative and fiscal policy is prudent but the public debt guarantees have increased to 92.8pc GDP”, she said.
She applauded the government of Pakistan on the policies saying, “Although, the Covid-19 shock temporarily suspended the progress of EFF, the authorities remained committed to the ambitious policy actions and structural reforms to strengthen economic resilience, advance sustainable growth, and achieve the EFF medium-term objectives.”
Regarding the much talked about the issue of autonomy of regulators such as the SBP and a perception that these are being compromised under the IMF program, she reiterated that all reforms that have been recommended were long due and are necessary for the help of the poor and vulnerable.
Explaining the role of IMF Ms. Sanchez said that the IMF only has an advisory role upon the request of the host country and cannot dictate how or what legislation is done.
According to Dawn, she asked the government to limit tax exemptions and widen its tax base. She said the country needed to put in more efforts to curtail circular debt and increase electricity rates as agreed upon in the deal with the Fund.
Energy reforms are the fourth foundation and institutional reform is the fifth to fix the Pakistani economy,” she said.
Pakistan faces a huge burden on the future of the economy, as the FATF plenary hearing is due in June, and the country is going through huge structural adjustments under the banner of different IGOs like World Bank, IMF, and FATF.
Meanwhile, PM Khan has hinted at going back to the international lender for a second relief package as the third Covid-19 wave has gripped the country with its services sector hit badly.