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Momentum continues to be favourable, IMF predicts 5.6pc growth

Momentum continues to be favourable, IMF predicts 5.6pc growth

ISLAMABAD: Pakistan’s growth momentum has continued to be favorable and GDP is expected to growth at 5.6 percent this year, supported by improved security conditions, energy supply, infrastructure investment and agriculture.

Maintaining this positive trend will require strengthening the economy’s resilience with greater exchange rate flexibility, fiscal discipline, and an adequately tight monetary policy stance, said an IMF press statement issued at the conclusion of its staff mission visit to Islamabad from December 5-14, 2017 led by Harald Finger.

The statement said that the recent move by the State Bank of Pakistan (SBP) to allow adjustment of the exchange rate was welcome, and continued exchange rate flexibility will be important in the period ahead.

It said that the IMF staff mission visited Islamabad to conduct discussions on the first post-program monitoring discussions since the end of Pakistan’s Extended Fund Arrangement (EFF) in September 2016.

“It has been a great pleasure for the mission to visit Pakistan and hold productive discussions in Islamabad for the first time in four years, which is reflective of the improved security situation in the country,” said Harald Finger in a statement.

The mission met with the Pakistan’s economic team, representatives of the business community, and academics.

He said that strengthening the economy’s resilience would be important to maintain Pakistan’s favorable growth momentum and ensure sustainable private investment and job creation in the medium term.

According to the statement, continued exchange rate flexibility in the period ahead would be important to facilitate external adjustment in support of exports and economic growth.

Alongside, fiscal discipline and an adequately tight monetary policy stance are needed to reverse the widening of external imbalances.

The statement said that a strong reform effort was needed to maintain external stability, ensure debt sustainability, and support higher and more inclusive growth in the medium term.

This includes pursuing medium-term fiscal consolidation driven by accelerated efforts to broaden the tax base, strengthening the monetary policy framework and autonomy of the SBP, careful phasing in of new external liabilities to contain external stability risks, eliminating the losses of public sector enterprises, improving the business climate, and continued strengthening of the financial sector.

In parallel, continuing to strengthen mechanisms for protecting the most vulnerable will be critical to support inclusive growth. In this context, continued expansion of the Benazir Income Support Program will be important, he added.