Muhammad Soban

The resumption of the loan programme of the International Monetary Fund for Pakistan will help the government to enforce its reforms besides strengthening the national economy, WealthPK reports. The experts said that the IMF loan would help Pakistan to cover its economic deficits and save the country from default. It would also help the government to enforce the agenda of economic reforms.

Dr Mahmood Khalid, a public policy expert, told WealthPK that the resumption of the IMF loan programme is a welcome sign for the economy of Pakistan. “Pakistan takes IMF as a creditor with strings attached, and these strings are reforms. Unfortunately, Pakistan doesn’t take these reforms seriously. That’s why it ends up agreeing to those reforms, which are more painful for our economy. Unfortunately, these reforms are a must for strengthening our economy,” he added.

He said that IMF talked about the management of the current account deficit and budget deficit. “If Pakistan doesn’t have an indigenous plan, it will execute the IMF plan. So, it gives a signal to the rest of the world on trustworthiness for our sovereign risk improvement,” he added.

However, Dr Mahmood Khalid said that the effects of the loan would be felt in the domestic market, especially by the poor and vulnerable segments of society. “Our Public Sector Development Programme (PSDP) will be cut due to fiscal constraints,” he said, adding that it was an ‘uneconomic’ approach to abandon development projects of PSDP.

He said that the Pakistan Institute of Development Economics (PIDE) conducted extensive work on the improvement of development and taxes besides other options for economic growth. “It is based on home-grown agenda for improving the existing system, with lesser fiscal requirements,” he said. He added that the options exercised by the government were tougher for the economic agents and less sustainable.

Dr Mahmood Khalid the IMF loan would give a positive signal, at least for the macro side of the economy, by improving the indicators of economic growth of the country. “However, from the micro perspective, it will be tough until Pakistan switches to an indigenous path of reforms. This debate will continue,” he told WealthPK.

On August 29, the IMF Executive Board completed the seventh and eighth reviews of the Extended Arrangement for Pakistan under the Extended Fund Facility (EFF). The board decided to immediately provide $1.1 billion to Pakistan. The aid package of $7 billion, which had been stalled for several years, was revived to stave off default despite severe economic hardship and devastating floods in Pakistan.

Antoinette Sayeh, IMF Deputy Managing Director, said that corrective policies and reforms must be implemented steadfastly to regain macroeconomic stability, address imbalances and lay the foundation for inclusive and sustainable growth.

Pakistan’s economic growth has been constrained by adverse external conditions, including spillovers from the Ukraine conflict and domestic challenges such as accommodative policies that caused uneven growth.

She also supported the move to increase interest rates to tighten monetary conditions, calling it a necessary measure to contain inflation.

IMF officials also advocated a "close oversight of the banking system and decisive action to address undercapitalised financial institutions" to maintain financial stability.

According to Ms Sayeh, a market-determined exchange rate remains crucial for absorbing external shocks, maintaining competitiveness and rebuilding international reserves.

IMF officials advised Islamabad to accelerate structural reforms to improve the business environment and strengthen governance. “For job creation and a strong private sector to develop, fair and level playing fields are essential,” according to the IMF board.

Credit : Independent News Pakistan-WealthPk