The International Monetary Fund (IMF) issued its country report on Pakistan on Thursday, noting that due to a “highly complicated” internal and external environment, risks to Pakistan’s economic outlook and program execution remained “high and slanted to the negative.”
The conflict in Ukraine’s fallout and domestic issues, such as accommodating policies that led to unequal and imbalanced development, has put Pakistan’s economy in a bad external situation. Regaining macroeconomic stability, addressing imbalances, and establishing the framework for equitable and sustainable growth all depend on the steadfast application of corrective policies and reforms.
In FY2023, Pakistan intends to generate a modest primary surplus, which is a good move to ease fiscal and external constraints and foster confidence. In order to provide room for much-needed social protection and enhance the sustainability of the public debt, current spending must be restrained, and tax revenues must be mobilized.
It is also crucial to make efforts to improve the energy sector’s profitability and lessen unaffordable losses, such as by sticking to the planned increases in fuel taxes and energy tariffs. Particularly in the current situation of rising inflation, more has to be done to combat poverty and safeguard the most vulnerable through improving targeted payments.
It was required to tighten monetary conditions by raising policy rates in order to limit inflation. Future restrictive monetary policy would contribute to reducing inflation and addressing external imbalances. These goals would be furthered by maintaining a proactive and data-driven monetary policy.
According to an IMF analysis, maintaining tight control over the banking system and taking prompt action to address financial institutions with insufficient capital will sustain financial stability. In order to withstand external shocks, preserve competitiveness, and restock foreign reserves, maintaining a market-determined exchange rate is still essential.
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