Abstract
Pakistan showed great achievements under the program supported by the Stand-By Arrangement. Executive Directors stressed the need to implement strong fiscal, monetary, and exchange rate policies, and accelerate structural reforms. They emphasized the need for enhancing governance, rationalization of energy prices, broadening of tax base, strengthening of tax administration, and improving the financial position of public enterprises and banks. Directors agreed that the country has completed the first review under the Stand-By Arrangement, and approved a waiver.
The Executive Board of the International Monetary Fund (IMF) completed today its first review of Pakistan’s performance under a Stand-by Arrangement (see Press Release No. 00/64), which enables the release of SDR 105 million (about US$133 million).
As part of the Executive Board’s review, revisions to initial performance criteria under the Stand-by Arrangement were also reviewed and approved. A revised Memorandum on Economic and Financial Policies (MEFP), which updates and supplements an MEFP dated November 4, 2000, is being published on the IMF’s website (www.imf.org). The memoranda provide details on Pakistan’s IMF-supported economic and structural reform program.
The Executive Board’s decision will bring total disbursements to Pakistan under the Stand-by Arrangement to SDR 255 million (about US$324 million).
Following the Board’s discussion of Pakistan’s program, Eduardo Aninat, Deputy Managing Director and Acting Chairman, issued the following statement:
“Pakistan’s achievements to date under the program supported by the Stand-By Arrangement have been encouraging. Inflation, the balance of payments, and the budget balance have been better than expected, and the build-up of official reserves has been brought in line with program assumptions. Economic activity was lower than expected, however, because of adverse weather conditions. The implementation of important structural reforms has been on track, including those on fiscal transparency and the rationalization of energy prices.
“To consolidate these achievements and build a solid foundation for sustained high growth over the medium-term, the authorities will need to pursue further macroeconomic adjustment and implement the structural reform program. A key challenge will be to achieve the targets for foreign exchange reserves, which will require a tightening of monetary policy and coordination of monetary and exchange rate policies. The authorities’ commitment to make further progress toward a genuinely market-based exchange rate policy will also help.
“Another challenge will be to boost revenue collections, a key precondition for containing the fiscal deficit while increasing social and pro-poor spending. This will require resolute action to broaden the tax base and strengthen tax administration. The extension of the sales tax coverage, and steadfast implementation by the Central Board of Revenue of the recently adopted short-term action plan to improve tax administration, will be critical.
“Other reform priorities are to further improve governance in the management of public resources, develop a transparent and business-friendly economic and regulatory environment, continue the restructuring of public enterprises, accelerate privatization, and strengthen financial soundness and efficiency,” Mr. Aninat said.