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April 9, 2015

Pakistan has stabilised its economy: IMF


April 9, 2015

The International Monetary Fund has said Pakistan has succeeded in stabilising its economy through implementation of reforms that would be vital for it to find a place in growing world markets.
A week prior to spring meetings, the IMF released a survey which points out that Pakistan has made a “good progress,” saying it has averted balance-of-payment crisis and its State Bank reserves were rebounding. The survey conducted an interview with the outgoing mission chief for Pakistan, Jeffery Franks, who said the fiscal deficit - which was large at over eight per cent of GDP two years ago was on track to get down below five percent of the GDP. “Not only is the deficit lower, but financing conditions have eased considerably,” Franks said, adding “The economy grew about four percent last year,” and the agency was expecting a similar figure in the current fiscal year. However, he said it was not enough to substantially improve income levels because of the high population growth rate.
Commenting on the structural reforms, Franks said the key achievements were tackling costly and inefficient electricity subsidies. “Those subsidies came down from almost two percent of GDP to 0.7 percent this year, and they are expected to fall to 0.3 next year.” He said government was also making progress on improving tax system. Pakistan has these “so-called Statutory Regulatory Orders, which grant tax exemptions and concessions, riddling the tax system with loopholes. Earlier, the government a significant number of SROs, and it’s expected to improve tax collection by 0.3 percent of GDP,” Franks said.
The outgoing IMF mission chief was of the view that Pakistan can do more to increase revenue collection at the provincial level. “The division of taxes and responsibilities between the federal government and the provinces in not balanced, and the authorities need to revisit that to avoid future problems.”
Franks said decline in oil prices would help

Pakistan save several billion dollars a year in oil imports. “We have advised the authorities to take advantage of this positive shock to move more quickly to remove major imbalances in the energy sector.” He said a key economic challenge for Pakistan was to continue the policies that it had begun and pushed the reforms through. Besides maintaining an economic stability they have to face security situation. “The lack of energy in Pakistan also remains a serious constraint on growth,” he said. Franks hoped if Pakistan could have a seven percent growth rate like India or China and sustain that over a decade or more, there would be an enormous transformation.

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