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February 16, 2020

IMF asks Pakistan to focus on meeting UN development goals

Business

February 16, 2020

KARACHI: International Monetary Fund (IMF) has underscored a need for Pakistani authorities to ensure no poverty, quality education and removing income disparities in line with sustainable development goals set by the United Nations (UN).

IMF Deputy Director Athanasios Arvanitis said it is important for the government to focus on meeting the sustainable development goals (SDGs) under the UN’s 2030 agenda.

“Ongoing fiscal reforms will not only put Pakistan’s public debt path on a sustainable footing but also build the foundation for providing crucial funding to meet these targets,” Arvanitis said, referring to IMF-backed reforms in Pakistan.

Pakistan is a signatory to the UN 17 sustainable development goals need to be met till 2030.

Arvanitis, addressing a seminar, said some of the main similarities of crises across emerging markets are notably the role typically played by elevated levels of debt, high public and external deficits, inflexible exchange rates, lack of competitiveness, low saving and investment, and maturity and currency mismatches.

“Despite these similarities, there was no one-size-fits-all model for managing crises,” he said. “Instead, the IMF focuses on different dimensions while assisting a country in developing a homegrown stabilisation program.”

The State Bank of Pakistan (SBP) hosted the seminar on “Managing Crises in Emerging Markets” in collaboration with the Pakistan Business Council (PBC) on Friday.

IMF deputy director said the Fund’s approach emphasises the need to diagnose the roots of a country’s crisis, trends and developments in the balance sheets of various economic agents and their interconnectedness and country-specific dynamics that affect the political economy of reforms.

Arvanitis stressed the importance of country ownership and measures to provide support for vulnerable segments of the population, in order to design stabilisation programs.

SBP Governor Reza Baqir said the central bank endeavors to facilitate constructive debate on economic issues in addition to its mandate of formulating monetary, exchange rate and financial stability policies and is open to diverse points of view

“Pakistan is not unique and there are many other emerging economies that have also faced economic crises and undergone difficult adjustments,” Baqir added.

PBC Chief Executive Officer Ehsan Malik said there is a skewed tax burden on the manufacturing sector and the need to put in place a national tariff policy that prioritises industrial promotion in the country instead of revenue generation. Business community is concerned about the level of interest rates in the country, he added.

Macro Economic Insights Chief Executive Officer Sakib Sherani said growth has historically not been steered towards a balanced trajectory despite the implementation of multiple IMF programs due to under-appreciation of initial conditions and negative feedback loops while these programs were designed.

Sherani advocated heterodox policies for managing crises. “Efficacy of IMF programs could be improved if they are longer, more back-loaded, and more heavily focused on structural conditionality rather than specific quantitative targets.”

Journalist Khurram Husain said none of previous IMF programs in Pakistan were able to put the economy on a sustainable growth trajectory.

“Due to the availability of capital and financial flows driven by exogenous factors very soon after the start of those programs, the focus on addressing structural vulnerabilities always remained inadequate,” Husain said. “In particular, Pakistan’s tax base has remained narrow and exports have failed to expand and diversify. This has weakened the relationship between economic stabilisation and growth, resulting in a recurrence of boom and bust cycles in Pakistan, whose brunt has fallen time and again on the poor.”