Macroe­co­nomic sta­bil­ity ma­jor con­cern in Pak­istan: WB

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Macroe­co­nomic sta­bil­ity in Pak­istan is a ma­jor con­cern for the near-term eco­nomic out­look, and sev­eral short­term mea­sures will be re­quired to cor­rect ex­ter­nal and do­mes­tic im­bal­ances, which must be com­ple­mented with im­ple­men­ta­tion of medium-term re­forms, said the World Bank.

In its re­port, ‘South Asia Eco­nomic Fo­cus Spring 2018’ re­leased in April, the World Bank has noted that Pak­istan’s eco­nomic growth con­tin­ues to ac­cel­er­ate but macroe­co­nomic im­bal­ances are widen­ing.

The bal­ance of pay­ments po­si­tion is par­tic­u­larly vul­ner­a­ble at the cur­rent level of re­serves, claimed the re­port. “Up­com­ing elec­tions may de­lay de­ci­sive pol­icy ad­just­ment, such as in­creased ex­change rate flex­i­bil­ity and fis­cal con­sol­i­da­tion, un­til af­ter the elec­tions. In the medium-term, the gov­ern­ment needs to put con­sid­er­able ef­fort in re­form­ing its tax sys­tem and tackle com­pet­i­tive­ness chal­lenges,” the re­port ob­serves.

A strat­egy based on low­er­ing the cost of do­ing busi­ness and im­prov­ing pro­duc­tiv­ity would be crit­i­cal for higher and sus­tain­able ex­port growth, em­pha­sises the World Bank.

The GDP growth is pro­jected to reach 5.8 per cent in 2018, how­ever, af­ter the gen­eral elec­tions, ex­pected pol­icy ad­just­ments to cor­rect for macroe­co­nomic im­bal­ances are pro­jected to lead to a slow­down in growth in 2019, driven by con­trac­tion in do­mes­tic con­sump­tion and in­vest­ment. “But the growth is ex­pected to re­cover in 2020 and reach 5.4pc. This re­cov­ery is con­tin­gent upon restor­ing and pre­serv­ing macroe­co­nomic sta­bil­ity, as well as steady progress in im­ple­ment­ing re­forms which tackle key growth con­straints,” the World Bank re­port adds.

Fo­cus­ing on the out­look, the re­port claims that the GDP growth was pro­jected to reach 5.8pc in 2018, sup­ported by in­fra­struc­ture projects of the China-Pak­istan Eco­nomic Cor­ri­dor (CPEC), im­proved en­ergy sup­ply and per­sis­tent pri­vate con­sump­tion growth.

The out­look as­sumes that oil prices will in­crease mod­er­ately but re­main low and that po­lit­i­cal and se­cu­rity risks will be man­aged.

The pres­sure on the cur­rent ac­count is ex­pected to per­sist as the trade deficit is pro­jected to re­main at an el­e­vated level dur­ing fis­cal year 2019. In­creased ex­change rate flex­i­bil­ity should sup­port ex­ports and im­ports are ex­pected to slow down in 2019. Re­mit­tances will con­tinue to partly fi­nance the cur­rent ac­count deficit; nonethe­less, slower growth in Gulf Co­op­er­a­tion Coun­cil (GCC) coun­tries will af­fect mi­grants’ em­ploy­ment op­tions and growth in re­mit­tances.

Ac­cord­ing to the re­port, for­eign di­rect in­vest­ment (FDI), mul­ti­lat­eral, bi­lat­eral, and pri­vate debt-cre­at­ing flows are ex­pected to be the main fi­nanc­ing sources in the medi­umterm. To meet ex­ter­nal fi­nanc­ing needs, the gov­ern­ment will con­tinue to ac­cess in­ter­na­tional mar­kets, the re­port says.

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