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IMF sees Pakistan growth picking up

Washington: The International Monetary Fund said Friday it saw strong signs of growth in Pakistan as the long-troubled economy undertakes structural reforms.

The IMF, which this week released a fresh $555.6 million (Dh2.04 billion) as part of its support programme for Pakistan, confirmed its recent forecast of 3.1 per cent growth this year, which was revised up from an earlier 2.8 per cent.

“The overall economic situation in Pakistan is gradually improving,” said Jeffrey Franks, the IMF mission chief for the country.

“That 3.1 per cent may still be a bit on the conservative side, so we see indicators of growth that are relatively strong considering the fiscal adjustment that has taken place,” he told reporters on a conference call.

For the 2014-15 fiscal year, the IMF expected Pakistan’s growth to accelerate to around 3.7 per cent.

Inflation is projected to hover around 10 per cent in the remainder of this fiscal year before easing to around 5–7 per cent in future years. The current account deficit is expected to be about 1 per cent of GDP.

An IMF report said that the growth was boosted by a stronger manufacturing industry thanks to an easing of Pakistan’s chronic electricity shortages, despite weaknesses in agriculture.

But the report cautioned that Pakistan still had tight foreign reserves and security challenges, including Taliban violence.

The report also said that Prime Minister Nawaz Sharif’s government, despite its commitment to IMF-backed reforms, faced “strong” political resistance to certain structural measures. “Policy implementation risks could depress growth. In particular, risks remain high on the reserve accumulation strategy as it depends on aggressive action by the State Bank of Pakistan, the country’s central bank, and on an ambitious profile on government debt and privatisation inflows. Political resistance to exchange rate adjustment could also increase the risk of balance of payments problems due to both higher current account pressures and lower capital inflows,” the report stated.

Sharif’s government, after taking office in June, reached a $6.7 billion bailout deal with the IMF which insisted on economic reforms, especially in the energy sector and tax system.

Yaseen Anwar, the governor of the State Bank of Pakistan who was appointed by a previous government, resigned in January ahead of the latest IMF review.