EUR 4.42 For Business Accounts Only

Intermarket Pulse: Pakistan Economy: Growth intact but IMF cautions against risks

• In its annual Article IV Consultation report, IMF concludes that policy implementation after the EFF program has weakened and macroeconomic vulnerabilities are reemerging. Budget targets for FY18 are deemed aggressive, which will either entail additional tax measures or drawing back of developmental budget.

• IMF has emphasized the need for greater exchange rate flexibility, which is pertinent for rescuing exports. Without it, Pakistan faces risks on the BoP front, especially in light of medium-term outflows from CPEC related projects. Also, administrative measures like imposing cash margin on imports are not efficacious.

• On the energy sector, IMF cautions against the buildup of circular debt and encourages daily monitoring of Discos. IPOs of Discos will help resolve governance issues, and proceeds will be used to settle the outstanding balance of arrears. Depending on CPEC/energy situation, IMF expects GDP growth to cross 6% over the medium term.