Washington, Oct 5: International Monetary Fund (IMF) on on Thursday cautioned Pakistan on “slumping” economy and advised to take “significant policy action and external finance”.
Pakistan is facing significant economic challenges, with declining growth, high fiscal and current account deficits and low levels of international reserves, IMF report, as quoted by Dawn said.
Though the IMF appreciated recently taken some policy measures, but said those were not sufficient.
“Once stabilisation is beginning to take hold, increasing focus is warranted on critical reforms to foster sustained and inclusive growth and strengthen institutions,” the report says.
An IMF staff team led by Harald Finger visited Islamabad from September 27 to October 4 to discuss Pakistan’s economic situation and exchange views on policies required for economic stabilisation and sustainable and inclusive growth.
At the end of the visit, Mr Finger blamed “overvalued exchange rate, loose fiscal policy and accommodative monetary policy” for this situation.
Mr Finger also noted that a fast rise in international oil prices, normalisation of US monetary policy and tightening financial conditions for emerging markets were adding to this difficult picture.
“In this environment, economic growth will likely slow significantly, and inflation will rise,” he warned.
“Policies should include more exchange rate flexibility and monetary policy tightening, further fiscal adjustment anchored in a medium-term consolidation strategy and strengthening the performance of key public enterprises together with further increases in gas and power tariffs,” the report adds.
Other suggested measures include enhancing the State Bank’s autonomy, intensifying efforts aimed at curbing money laundering and countering terrorism financing, improving the business climate and anti-corruption efforts and fostering the economic inclusion of the poor, youth, and women.(UNI )