IMF sees decline in Pak inflation in coming months

WASHINGTON: The International Monetary Fund (IMF) has said Pakistan’s inflation is expected to decline in the coming months with the current account adjusting “more rapidly than anticipated”, but, domestic and international risks remain and structural economic challenges persist.

The IMF, in a statement issued on Friday following the conclusion of a delegation led by mission chief Ernesto Ramirez Rigo, it said Pakistan’s economic programme is off to a promising start but “decisive implementation is critical to pave the way for stronger and sustainable growth”.

According to the statement, the IMF mission will return to Pakistan in late October to conduct the first review under the EFF. An IMF mission led by Rigo visited Islamabad and Karachi during September 16 and 20 to take stock of economic developments since the start of the Extended Fund Facility (EFF) and discuss progress in the implementation of economic policies. A full mission for the first review under the EFF is planned for late October.

At the conclusion of the staff visit, Rigo said while Pakistani authorities’ economic reform programme is still in its early stages, there has been progress in some key areas.

He said the transition to a market-determined exchange rate “has started to deliver positive results on the external balance”. The volatility in the exchange rate has diminished, and monetary policy is helping to control inflation while the SBP has improved its foreign exchange buffers, he added.

He said: “There has been a significant improvement in tax revenue collections with taxes showing double-digit growth, net of exporters’ refunds Moreover, the FBR is undertaking significant steps to improve tax administration and its interface with taxpayers.”

Staff and the authorities have analysed the worse-than-expected fiscal results of FY2018-19, which were partially the result of “one-off factors” and should not jeopardise the ambitious fiscal targets for FY2019-20.

“Importantly, the social spending measures in the programme have been implemented. The near-term macroeconomic outlook is broadly unchanged from the time of the programme’s approval with growth projected at 2.4 per cent in FY2019-20.

“Inflation is expected to decline in the coming months and the current account adjusting more rapidly than anticipated, However, domestic and international risks remain and structural economic challenges persist.

The IMF then stressed that in this context, the authorities need to press ahead with their reform agenda. In order to complete the first review an IMF staff team plans to return to Pakistan in late October to assess the end September programme targets.