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PAKISTAN-ECONOMY-IMF
IMF calls for more action in Pakistan, but no word on bailout
ISLAMABAD, Oct 5, 2018 (BSS/AFP) – The International Monetary Fund has
called on Pakistan’s new government to act fast to stabilise its teetering
economy, warning growth will likely slow and inflation rise, but made no
mention of a new bailout deal.
Former cricketer Imran Khan’s new administration had vowed to decide by
the end of September if it would seek an IMF bailout to shore up the economy
as it faces a balance-of-payments crisis and dwindling reserves.
However, it has yet to announce a deal as its seeks other arenas of
financing and launched a highly publicised austerity drive that has included
auctioning off government-owned luxury automobiles and buffaloes.
The IMF said in a statement released late Thursday that Pakistan was in
need of significant external financing in the near term and recommended
upping gas and power tariffs while also pushing for exchange rate
“flexibility” and monetary policy tightening.
“These steps would help reduce current account pressures and improve debt
sustainability,” said the fund in a statement.
But it warned that tough days may lay ahead as higher oil prices and
tightening financial conditions for emerging markets will likely add to
Pakistan’s economic woes.
“In this environment, economic growth will likely slow significantly, and
inflation will rise,” said the IMF.
Pakistan has gone to the IMF repeatedly since the late 1980s. The last
time was in 2013, when Islamabad got a $6.6 billion loan to tackle a similar
crisis.
For months analysts have warned Khan’s new government must act quickly to
stem a new current account crisis, which could undermine its currency and its
ability to repay billions in debts or purchase imports.
The US, one of the IMF’s biggest donors, has raised fears Pakistan could
use any bailout money to repay mounting loans from China, sparking criticism
from Islamabad.
Pakistan’s budget deficit has climbed steadily over the past five years,
and foreign currency reserves have declined. The rupee has been repeatedly
devalued in the past year, fuelling inflation.
Khan has vowed to improve trade with India, increase the ease of doing
business and boost tax collection but since taking office in August is yet to
roll out a comprehensive plan aimed at tackling the country’s economic
fortunes.
The state of Pakistan’s finances could also undermine one of Khan’s most
popular promises to construct an “Islamic welfare state” based on increased
spending on education and health.
The IMF’s warnings come days after the Asian Development Bank said
Pakistan’s economy could shrink by one percent in the the current fiscal
year.
BSS/AFP/HR/1404