IMF hails Pakistan’s efforts to restore economic stability

ISLAMABAD: While appreciating Pakistan’s efforts to restore economic stability, the International Monetary Fund (IMF) has asked it to rationalise gas tariff as it will help better allocate current supply and encourage new production.
The increase in gas tariff is on cards in Pakistan at a time when the country has recently imported much awaited LNG.
“Structural reforms are progressing, albeit with some difficulties. While the power sector regulatory reform continues, progress in the gas sector has been uneven. Implementation of gas price rationalisation should help better allocate current supply and encourage new production,” Mitsuhiro Furusawa, Acting Chair and Deputy Managing Director, said on the eve of approving 7th tranche worth $501 million at Washington DC.
He said that current environment of lower oil prices provides an opportunity to speed-up electricity tariff rationalisation while continuing to improve the operations and collections of energy companies. The authorities remain committed to privatisation of public sector enterprises, as well as to trade policy and business climate reforms.”
The IMF Executive Board completed the sixth review of Pakistan’s economic performance under a 36-month program supported by an Extended Fund Facility (EFF) arrangement, enabling Islamabad disbursement of an amount equivalent to SDR 360 million (about $501.4 million), bringing total disbursements under the arrangement to SDR 2.52 billion (about $3.5 billion).
At the conclusion of the Executive Board’s discussion, Furusawa issued the following statement: “The authorities’ strong performance under Pakistan’s Fund-supported program is to be commended. Progress has been made in restoring economic stability, improving growth prospects and reducing crisis risks.
He said it will be important to build on these gains and continue determined efforts to implement reform agenda to achieve economic transformation and higher sustainable growth. “Fiscal consolidation is underway through efforts to broaden the tax base and reduce costly and inefficient electricity subsidies. Scope remains to increase tax compliance and enforcement and further reduce energy subsidies, while continuing to protect the most vulnerable. Enhanced public debt management remains a priority, together with further efforts to diversify fiscal financing and reduce reliance on central bank borrowing.
“Monetary policy remains prudent and foreign exchange reserves are increasing. However, legislation to enhance central bank independence remains crucial and should conform to international best practices. Efforts to improve central bank functioning should also continue, including through improved functioning of the interest rate corridor, effective open market operations and strengthened risk management and internal operations.
“The financial sector remains stable and profitable and progress in bank capitalisation is satisfactory. Further reforms are needed to safeguard financial stability and a number of legislative actions are underway in this regard. Commendable efforts to combat terrorism financing, money laundering, and tax offenses have been made and would need to be sustained,” he concluded.