Islamabad: The International Monetary Fund (IMF) has acknowledged the improvement and progress in Pakistan’s economic. The country’s GDP growth rate is projected to reach 3.2% in the current fiscal year (2024-25), compared to 2.4% in the previous year. This improvement is attributed to consistent policy implementation under the 2023-24 Stand-by Arrangement (SBA).
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As per the IMF, below are the key points indicating the stability in the Pakistan’s economy:
- Inflation has significantly decreased, falling to single digits due to tight fiscal and monetary policies.
- The current account deficit is under control, and foreign exchange market conditions are stable, allowing for a rebuild of reserve buffers.
- The State Bank of Pakistan has been able to cut interest rates due to disinflation and steadier economic conditions.
Pakistan’s Economy Challenges Remain:
Despite the progress, Pakistan economy faces significant structural challenges:
- A difficult business environment
- Weak governance
- An oversized role of the state hindering investment
- A narrow tax base limiting fiscal sustainability
- Insufficient spending on health and education
- Inadequate infrastructure investment
To acknowledge and overcome these challenges, below are some of the strategies proposed:
To address these challenges and achieve sustainable growth, Pakistan is embarking on a new program supported by the IMF’s Extended Fund Facility (EFF).
The program focuses on:
- Strengthening macroeconomic policies and broadening the tax base.
- Advancing reforms to increase competition, productivity, and competitiveness.
- Reforming state-owned enterprises (SOEs), improving public service delivery, and ensuring energy sector viability.
- Building resilience to climate change.
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The IMF recommends continued fiscal consolidation through increased revenue collection and prudent spending management. This will free up resources for essential investments in human capital, infrastructure, and social programs. Additionally, reforms are needed to improve tax administration, make public investment more efficient, and address the longstanding issues of undercapitalized financial institutions and climate vulnerability.
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