International Monetary Fund. Middle East and Central Asia Dept.
This paper discusses First Post-Program Monitoring Discussions with Pakistan. Pakistan’s near-term outlook for economic growth is broadly favorable. Real GDP is expected to grow by 5.6 percent in FY2017/18, supported by improved power supply, investment related to the China–Pakistan Economic Corridor, strong consumption growth, and ongoing recovery in agriculture. Inflation has remained contained. However, continued erosion of macroeconomic resilience could put this outlook at risk. The FY2017/18 current account deficit could reach 4.8 percent of GDP, with gross international reserves further declining in a context of limited exchange rate flexibility.
This Selected Issues paper analyzes the surprising strength of remittances in Bangladesh and other countries in South Asia and the Philippines in 2009. The empirical analysis suggests that the continued strong growth of remittances in these countries is related to the resilience of non-oil GDP growth in the GCC countries and the surge in the GCC countries’ hiring of migrant workers from South Asia during 2006–08. The remittances-to-GDP ratio in South Asia and the Philippines are likely to remain robust in the near term.
This paper discusses key findings of the Third Review Under the Stand-By Arrangement for Pakistan. Program implementation has been uneven but key reforms are moving forward. All end-September 2009 quantitative performance criteria were met, with the exception of the ceiling on the overall budget deficit. The tax revenue foregone in September was largely recovered in October, and the wage bill overrun was self-correcting. On these grounds, the authorities request a waiver of nonobservance for the related end-September 2009 performance criterion. IMF staff recommends the completion of the program review.
Pakistan’s authorities have requested a 23-month Stand-By Arrangement for SDR 5.169 billion in support of their macroeconomic stabilization program. The authorities’ program envisages a tightening of fiscal and monetary policies to bring down inflation and reduce the external current account deficit to more sustainable levels. The pace of adjustment seeks to balance the need to address the current macroeconomic imbalances with protecting social stability. The program envisages important reforms in tax policy and administration and public financial management.
Pakistan’s economy continued to perform strongly owing to sound macroeconomic management and structural reform. Executive Directors advised that tight fiscal and monetary policies are required to reduce inflation and the external current account deficit while lessening pressures on real interest rates. They welcomed the enactment of the Anti-Money Laundering and Combating the Financing of Terrorism (AML/CLT) ordinance. They underscored the need to modernize the energy sector’s regulatory and tariff framework and revive the privatization process. Directors urged action to strengthen public financial management.
Ms. Katrin Elborgh-Woytek and Mr. Julian Berengaut
Against the background of the theory of optimum currency areas, the paper analyzes possible sequences for establishing a currency union (CU) in the Middle East and Central Asia region. Between the corner solutions of independent currencies for all countries in the region and a CU comprising all countries, a large number of combinations of member countries in the CU is possible. The analysis aims to determine the composition of potential CUs as a function of the country initiating the CU, an exogenously determined number of currencies in the region, and the weight attached to the particular selection criteria. Within this framework, the study seeks to establish whether some countries are consistently selected at early stages of the process, while others join only at later stages.
Mauritius showed slow economic growth owing to the deteriorating external economic environment, particularly of the sugar and textile sectors. Executive Directors urged the authorities to develop a comprehensive economic strategy that combines structural reform measures and policies geared toward macroeconomic stability. They commended the financial sector reform and the implementation of Financial Sector Assessment Program recommendations, welcomed the financial sector monitoring and tax reforms plans and emphasized the need for strong exchange rate and monetary policies for securing external competitiveness.
In this study, economic developments and achievements, the role of the IMF, strong economic recovery, the formulation and implementation of the government’s budgetary policy, and the progress made in rebuilding fiscal institutions are first discussed in detail. An overview of the challenges and issues of the authorities faced in the area of monetary and exchange rate policy is also provided. The authorities decided that the primary objective of monetary policy should be to achieve and maintain price stability and thus to restore confidence in the national currency.
Pakistan showed good macroeconomic performance over the past years. Executive Directors welcomed the program, which aimed at strengthening the balance-of-payments position, rebuilding official reserves, and reducing public sector indebtedness. They emphasized the need for revenue mobilization, improving investor confidence, poverty alleviation, good governance, tightening fiscal and monetary policies, and improvement in the collection, quality of data, and transparency. They approved financial support for the country's economic developments under the Stand-By Arrangement.
Mr. Fabio Scacciavillani and Mr. Malcolm D. Knight
This paper surveys the main theoretical approaches for analyzing movements in the current account of the balance of payments, from the Mundell-Fleming paradigm to modern intertemporal approaches. It discusses the main implications of these analyses for policymaking, highlighting that modern economic theory views current account imbalances not simply as a reflection of goods market developments, but also as an outcome of intertemporal consumption and investment choices and associated capital market behavior. To reflect on the policy strategies applied under diverse circumstances, the paper analyzes the recent experiences of Italy, Israel, and Pakistan.