The new reform package introduced by the government of Pakistan has been welcomed by the International Monetary Fund (IMF). Director of the Middle East and Central Asia Department at the IMF, Jihad Azour, was discussing it at the recent press briefing. According to him, the prime objectives of this package are attaining fiscal sustainability and solving long-standing financial problems.
On his part, Azour said the reform package is aimed at strengthening the macroeconomic stability and minimizing financing risks; apart from targeting energy and SOEs, improving the overall business environment.
Under this scenario, Pakistan’s economy will grow by 2.4% this year against actual contraction of 0.2% last year. Then, growth is expected to jump up to 3.2% the following year. Inflation is expected to ease down to 12.6% this year from 29% last year and further decline to 10.6% the next year.
A principal thrust of the reform package is to enhance fiscal sustainability through revenue increase and improvement in tax collection. This will ultimately reduce the deficit in the budget and improve the quality of revenue.
Another key component of reforms involves SOEs. Reforming SOEs would generate more opportunity in the private sector as well as attract FDI. This transformation will make the economy much more export-driven and readied for further investments.
All of this means, in the view of Azour, that the monetary policy addresses inflation and eases the burdens of constraints on capital flows and currency transfers. With these reforms in combination, such policies will add predictability to the economy and reduce risks to the current account.
In short, the reform package is set to be established not only for stabilizing the economy and reducing the financial risks but also for streamlining significant sectors, attracting more foreign investment, and unleashing the latent energies of the Pakistan economy minus a dent on current account balances.
