ISLAMABAD: The International Monetary Fund (IMF) has reported an overall improvement in macroeconomic conditions in Pakistan, forecasting a 2% economic growth in FY24.
Despite these positive developments, the outlook remains challenging and contingent on the effective implementation of sound policies, according to a press statement released as part of the Executive Board’s announcement regarding the completion of the first review of Pakistan’s Stand-By Arrangement (SBA).
The Washington-based lender acknowledged the general improvement in macroeconomic conditions, citing a projected 2% growth in FY24 as the nascent recovery expands in the latter half of the year.
It also noted a strengthened fiscal position in FY24Q1, with a primary surplus of 0.4% of GDP driven by robust overall revenues.
However, the IMF highlighted that inflation remains high in Pakistan, stating that with appropriately tight policy, it could decrease to 18.5% by the end of June 2024.
The IMF provided additional insights, mentioning that Pakistan’s gross reserves increased to $8.2 billion in December 2023 from $4.5 billion in June.
The exchange rate has remained broadly stable, and the current account deficit is expected to rise to around 1.5% of GDP in FY24 as the economic recovery takes hold.
The statement emphasized the importance of sustained sound macroeconomic policy and structural reform implementation for the return of inflation to the State Bank of Pakistan’s target and continued strengthening of growth over the medium term.
Looking ahead, the IMF recommended broad-based reforms to enhance the fiscal framework, including mobilizing additional revenues, especially from non-filers and under-taxed sectors, and improving public financial management to create fiscal space for further social and development spending.
The Executive Board’s decision, following the first review, allows for an immediate disbursement of SDR 528 million (around $700 million), bringing the total disbursements under the SBA to SDR 1.422 billion (about $1.9 billion).
The 9-month SBA was approved by the Executive Board on July 12, 2023, in the amount of SDR 2.250 billion (about $3 billion at the time of approval).
The program aims to provide Pakistan with a policy anchor for addressing domestic and external balances and a framework for financial support from multilateral and bilateral partners, focusing on fiscal adjustment, exchange rate policies, monetary policy, and structural reforms.
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