Economy sees ‘V shaped’ recovery despite tough IMF programme

ISLAMABAD: Economy is undergoing a strong ‘V-shaped’ recovery despite being in a tough International Monetary Fund (IMF) bailout programme, finance minister said on Saturday.

"(The IMF programme) was necessitated by unsustainable current account deficit and falling foreign currency reserves, and a vicious Covid 19," Shaukat Tarin said in a tweet.

Tarin, previously a strong critic of the IMF's ultra-rigorous conditions attached to the bailout program, expressed gratitude for Prime Minister Imran Khan and his team for achieving the growth.

The $6 billion loan programme had stalled last year over the Prime Minister's refusal to introduce unpopular measures.

In February, however, the IMF and Pakistan announced the resumption of a stalled programme, signed in 2019 to “ensure debt sustainability and advance structural reforms”.

The sticking points between Pakistan and the IMF included raising electricity tariffs, higher tax collection targets and increasing the repo rate, which was lowered to 7 percent in June from 13.25 percent earlier in the year.

In the first week of May Pakistan approached the IMF and asked for slashing down the FBR’s collection target from Rs5.9 trillion to Rs5.5 trillion maximum for the upcoming budget, keeping in view the prevalence of the third wave of Covid-19 pandemic.

Analysts said Pakistan needs the IMF programme to meet its debt repayments and unlock more funds from international financial institutions.

The countries external debt and liabilities have grown from $95 billion in 2018 to almost $113 billion in 2020, with a subsequent rise in debt servicing.

Pakistan’s economic growth is expected to hit 3.94 percent this year through some uncertainty shrouds the forecast, given the third wave of the pandemic currently engulfing the country.

International donors said private consumption picked up from July to December 2020, in part due to the record increase in remittances inflows, social assistance support, the government’s construction package and a return to pre-Covid mobility levels from September.

Investment is recovering, with machinery imports and cement sales both recording double-digit growth rates in the same period.

Due to a combination of GDP growth and strengthening of rupee against the dollar, per capita income jumped by 13.4 percent during the current fiscal year to $1,543 from $1,361 .The GDP increase from $263 billion to $296 billion, an increase of $33 billion during the current fiscal year, was the highest ever in any year.