ISLAMABAD: Pakistani economy expected to grow after IMF-EFF tranche approval, WealthPK reported on Wednesday.
The International Monetary Fund (IMF) and Pakistan had been at a tango as the country’s Extended Fund Facility (EFF) was stalled due to disagreements.
After a lot of negotiations and delays, the sixth review has been successfully completed, paving the way for the immediate release of the next tranche of $1 billion, WealthPK reported.
The IMF-EFF was signed in July, 2019 and was originally intended to be a 39-month long program worth approximately $6 billion. The subsequent seventh review is expected to be wrapped up by April, 2022 while the last – eighth – review marking the end of the IMF program will hinge on the budget for fiscal year 2022-23.
The EFF is aimed at medium-term structural reforms for countries suffering from persistent external imbalances. A developing country like Pakistan usually is in pursuit of expansionary fiscal policies – especially in the times of crisis, like the coronavirus pandemic – which further burdens the external account, WealthPK reported.
The Fund plans to help Pakistan fully implement the much-needed structural reforms for long-term sustainability of the economy. For this purpose, the IMF program will come to an end with the approval of budgetary targets for FY 2023 for the country.
The current IMF program is 22nd for Pakistan; however, reforms have hardly ever been fully implemented which have, at times, further exacerbated the economic woes of the country.
This time around, the commitment of the incumbent government and the IMF towards a sustainable growth trajectory for Pakistan is expected to bear fruits soon.
What to expect from the economy?
The recent rebasing of the Gross Domestic Product (GDP) puts the growth estimates for the previous fiscal year at 5.37%. The GDP, in dollar and rupee terms, has also grown significantly – currently standing at $347 billion. The real GDP growth is expected to sustain for the current fiscal year and average at 4%.
Furthermore, due to the pursuit of contractionary monetary policies by the State Bank of Pakistan (SBP) at the behest of the Fund, the inflation is also expected to tone down – albeit after a brief uptrend. The weekly Sensitive Price Index (SPI) has been on a continuous decline, which indicates the falling prices of essential commodities.
The past week saw a decline of 1.35% in prices of 51 essential commodities, reported WealthPK.
The Pakistani economy is on the right track on account of the current prudent macroeconomic policies along with a market-based exchange rate.
The country has also been utilising financial instruments like ESG bond and Sukuk bonds which are considered to pave the road towards economic recovery by leading economists of the country like Dr Ashfaque Hassan Khan.
The government’s proactive stance with respect to the macroeconomic woes of the country is also evident from the recent formation of a Macroeconomic Advisory Group consisting of economic experts to serve as a guiding light for the policy process. -INP
