IMF satisfied with three-year performance of Pak economy

ISLAMABAD: On the eve of expiry of $6.4 billion programme, IMF has expressed satisfaction over three years progress of Pakistan’s economy, arguing that the country created sufficient buffer stocks on macroeconomic fronts to face risks and also achieved reduction in pace of accumulation of circular debt in the power sector from Rs70-80 billion per annum three years ago to just Rs8 billion in last financial year.

“The ship of Pakistan’s economy has turned towards right direction after three-year programme of IMF as foreign exchange reserves were built up, fiscal position improved and pace of accumulation of circular debt reduced from Rs70-80 billion per annum three years ago to just Rs8 billion in the last financial year that ended on June 30, 2016. Load shedding timings have decreased. Now it’s up to Pakistani authorities how they tread the ‘reform path’ to avoid risks on economic fronts in months and years to come,” the IMF’s Resident Chief in Pakistan Tokhir Mirzoev told a select group of reporters here on Wednesday.

On reducing of accumulated circular debt of the power sector, the IMF resident chief said that the stocks of circular debt went down to just Rs8 billion in last financial year 2015-16 as it had once increased from Rs313 billion to Rs321 billion. Three years ago, the circular debt went up Rs70-80 billion in first year, Rs50 billion in second year and Rs20 billion in the third year. Now the circular debt has increased only by Rs8 billion in the previous financial year. He said that the circular debt on account of liabilities of power holding companies stood at Rs335 billion. 

To another question regarding erasing of circular debt on account of power holding company, he said that the government revised its plan to go ahead with launching of IPOs of power distribution companies after shelving plan to privatise Discos.  He said that three years ago the Fund sponsored programme of $6.4 billion under Extended Fund Facility (EFF), Pakistan’s economy was now more resilient to external and internal shocks. However Pakistani authorities will have to pursue reform path instead of sitting and enjoying. “If the reform path is not followed then risk may reappear,” he added.

Pakistan’s economy, he said, was facing difficult situation three years back and added that the country’s economy became vulnerable owing to external shocks and bad economic policies. Now if Islamabad gives up living beyond its means, it is not expected to come back to the Fund programme after a few years.

Regarding Pakistan’s becoming eligible for post programme monitoring (PPM) after expiry of EFF arrangement by end of next month, the IMF chief said that the Fund’s Executive Board would be holding its meeting by end of September 2016 for completion of ongoing programme. He said that the PPM would be done bi- annually and first PPM would be done in February/March 2017 but its exact schedule was not yet finalised.

He said that the IMF would be issuing assessment letters after analysing the country’s economy as it is relevant to mention here that this assessment is considered important for getting loan approvals from other multilateral creditors such as the World Bank and Asian Development Bank.

When asked about credibility of the official data released by Pakistan Bureau of Statistics (PBS), the Fund chief said that the IMF relied upon official statistics for which the IMF had provided technical assistance. The PBS, he said, was using the same methodology. 

“It is not the mandate of the IMF to verify or validate official figures of GDP or others as they are not investigating agency. It is up to the internal institutions and parliament of the country to verify or reject any official figures as the IMF is not meant for such issues”, he concluded.