Business

IMF sees ‘tentative signs’ of Pakistan’s economic activity picking up

Published

4 months ago

Farwa

IMF sees inflation at 18.5% by end-June 2024.
Says current account deficit to rise to 1.5% of GDP in FY24.
Market-determined exchange rate urged to buffer external shocks.

With the approval by the Executive Board for the release of the second tranche under the Stand-By Arrangement (SBA), the International Monetary Fund’s (IMF) Deputy Managing Director Antoinette Sayeh commented that the economy is showing “tentative signs of activity picking-up and external pressures easing” for cash strapped Pakistan.

Sayeh noted that the country’s performance under the SBA has supported significant progress in stabilising the economy following the significant shocks of the last fiscal year.

“There are now tentative signs of activity picking-up and external pressures easing. Continued strong ownership remains critical to ensure the current momentum continues and stabilisation of Pakistan’s economy becomes entrenched,” said the deputy MD who was also the chair of the board meeting that approved the release of $700 million. The release means total disbursements under the SBA stand at close to $1.9 billion.

“The authorities’ strong revenue performance in FY24Q1 as well as federal spending restraint have helped to achieve a primary surplus in line with quarterly program targets. However, in the context of pressures, including from provincial spending, efforts at mobilising revenues and ongoing non-priority spending discipline need to continue to ensure that the budgeted primary surplus and debt goals remain achievable,” said the deputy MD.

The IMF official advised the authorities in Pakistan to go for broad-based reforms to improve the fiscal framework by mobilising additional revenues specifically from non-filers and under-taxed sectors and improving public financial management. She believes these actions would give Pakistan fiscal space to further social and development spending.

“Inflation remains high, affecting particularly the more vulnerable, and it is appropriate that the State Bank of Pakistan maintains a tight stance to ensure that inflation returns to more moderate levels. Pakistan also needs a market-determined exchange rate to buffer external shocks, continue rebuilding foreign reserves, and support competitiveness and growth. In parallel, further action to address undercapitalized financial institutions and, more broadly, vigilance over the financial sector is necessary to support financial stability,” said Sayeh.

IMF expects 2% growth

The lender in its statement also stated that macroeconomic conditions have generally improved in the country and expects 2% growth in ongoing fiscal year as the “nascent recovery expands in the second half of the year”.

“The fiscal position also strengthened in FY24Q1 achieving a primary surplus of 0.4% of GDP driven by overall strong revenues. Inflation remains elevated, although with appropriately tight policy, this could decline to 18.5% by end-June 2024,” said the IMF.

The lender forecasts that the current account deficit may increase to around 1.5% of GDP in FY24 as the recovery takes hold.

“Assuming sustained sound macroeconomic policy and structural reform implementation, inflation should return to the SBP target and growth continue to strengthen over the medium term,” said the IMF.

Pakistan was nearing a default when the Pakistan Democratic Movement-led government (PDM) was about to end its term last year. However, entering the SBA with the IMF helped the South Asian nation stave off the sovereign default.

The forex reserves held by the State Bank of Pakistan (SBP), as of January 5, stand at $8.1 billion, while the country’s total reserves have reached $13.2 billion after a debt of $66 million was repaid.

With the addition of the latest tranche, Pakistan’s forex reserves will reach a six-month-high — as on July 14, the SBP reserves were around $8.73 billion.

Business

The World Bank and Pakistan reach consensus on a new partnership framework for reforms.

Published

14 hours ago

Farwa

Meetings between Prime Minister (PM) Shehbaz Sharif and a delegation headed by Martin Raiser, Regional Vice President of the World Bank for South Asia, resulted in the agreement.

Praiseing the World Bank’s role in Pakistan’s growth, Prime Minister Shehbaz welcomed Martin Raiser.

After the floods in Pakistan in 2022, the prime minister expressed gratitude for the Bank’s cooperation in constructing climate-resilient infrastructure. He gave the delegation an overview of the government’s reform programme, which included ending child stunting, improving per acre production in agriculture, reforming the power sector, and digitising the entire tax system.

Martin Raiser expressed appreciation for Pakistan’s determined reform programme and stated that the World Bank was prepared to work with the nation to improve its economy in order to achieve sustainable development.

A new Country cooperation Framework with an annual review mechanism to evaluate progress and guarantee results was reached was agreed upon by both parties to initiate a long-term, targeted cooperation.

In order to accommodate future course corrections, the technique will be flexible. On a chosen list of crucial development goals for Pakistan, the new alliance aims to produce transformative effects over a ten-year period.

Structural economic reforms, including tax policy changes and domestic resource mobilisation, mainly through digitalization, were among the first set of goals that were discussed during the summit.

It was also explored how to improve basic learning and reduce child stunting through human capital development.

Reforms pertaining to the energy sector, such as broadening the role of the private sector in transmission and distribution, and shifting to renewable energy sources to make energy more affordable, environmentally friendly, and financially viable, were also deliberated.

Both sides stressed the need for cooperation in climate adaptation in order to effectively handle the increasing scarcity of water and shocks due to climate change.

Pakistan can gain from the Bank’s experience in leveraging digital transformation, building institutional capacity, mobilising global expertise and best practices, and engaging the private sector through the International Finance Corporation, Multilateral Investment Guarantee Agency, and the World Bank’s private sector arm to enhance economic opportunities, including in the agriculture sector.

The federal and provincial governments, as well as academic institutions, legislators, members of civil society, development partners, and the commercial sector, will all be consulted throughout the establishment of the new Country Partnership Framework, the parties agreed.

In order to discuss partnership priorities that are appropriately aligned with the Government of Pakistan’s strategy and top development priorities, the World Bank will work with relevant stakeholders.

Najy Benhassine, the country representative of the World Bank, and Dr. Kazim Niaz, the secretary of the Economic Affairs division, signed a joint communique in this regard, which the prime minister saw.

Business

Pakistan will “seek” to have a $12 billion loan from friendly nations rolled over.

Published

15 hours ago

Farwa

According to information, Pakistan will require Rs23 billion in foreign funding for the upcoming FY2024–2025. In light of this, Islamabad has apparently chosen to pursue the rollover of a $12 billion loan from friendly nations, such as Saudi Arabia, the United Arab Emirates, and China.

According to information provided by sources inside the finance ministry, rollovers for loans totaling $5 billion from Saudi Arabia, $4 billion from China, and $3 billion from the United Arab Emirates would be pursued in order to cover the external funding requirements for the upcoming year.

Budgetary allocations also take into account the new funding from the World Bank, Asian Development Bank, and other financial organisations.

On May 2, it was revealed that the government of Pakistan had made the decision to “finalise” the FY2024–25 budget targets before to the arrival of an IMF team in Islamabad.

Pakistan has scheduled the arrival of the IMF team on May 15th for negotiations on the new loan programme that it is requesting to meet its financial demands.

According to sources, the government hurried budget target preparations prior to the IMF mission’s arrival. The relevant ministries have been instructed by the Ministry of Finance to meet their targets as soon as possible.

Business

Pakistan’s lunar mission ‘ICUBE-Q’ reaches the moon orbit.

Published

2 days ago

Farwa

Pakistan’s lunar mission (ICUBE-Q) entered orbit around the moon on Wednesday.

Pakistan’s historic lunar mission (ICUBE-Q) launched from Hainan, China, on Friday aboard China’s Chang’E6 spacecraft.

According to the IST, the satellite ICUBE-Q was planned and developed in partnership with China’s Shanghai University SJTU and Pakistan’s national space agency SUPARCO.

The ICUBE-Q orbiter is equipped with two optical cameras to image the lunar surface. ICUBE-Q has now been integrated into the Chang’e6 mission after successfully qualifying and testing it.

Chang’e6 is the sixth lunar exploration mission launched by China.

The launch event was streamed live on the IST website and social media platforms. Chang’6, China’s Lunar Mission, will land on the Moon’s far side to collect surface samples before returning to Earth for further research.