IMF ap­proves

Pakistan Observer - - IN­TER­NA­TIONAL -

is­sued the fol­low­ing state­ment:

“Pak­istan is fac­ing se­ri­ous eco­nomic chal­lenges. Over­all vul­ner­a­bil­i­ties and cri­sis risks are high, with sub­par growth and un­sus­tain­able fis­cal and bal­ance of pay­ments po­si­tions. In this con­text, the au­thor­i­ties’ com­pre­hen­sive eco­nomic pro­gram is timely and wel­come.

“The au­thor­i­ties’ 2013/14 fed­eral bud­get rep­re­sents an im­por­tant ini­tial step to­wards the needed fis­cal con­sol­i­da­tion.

How­ever, to en­sure medium-term fis­cal sus­tain­abil­ity and cre­ate fis­cal space for so­cial and in­vest­ment spend­ing, it is im­por­tant to raise the tax-toGDP ra­tio, in­clud­ing by broad­en­ing the tax base through a re­duc­tion in ex­emp­tions and con­ces­sions and ex­tend­ing tax­a­tion to ar­eas cur­rently not fully cov­ered by the tax net. An over­haul of tax ad­min­is­tra­tion is also re­quired, and prov­inces should con­trib­ute fully to the ad­just­ment ef­fort.

“Mone­tary and ex­change rate poli­cies should be geared to re­build­ing ex­ter­nal buf­fers, di­rect lend­ing to the govern­ment should cease and ef­forts to im­prove in­de­pen­dence of mone­tary pol­icy need to be stepped up to pave the way for im­proved price sta­bil­ity.

Risks to the bank­ing sec­tor are man­age­able, al­though the un­der­cap­i­tal­iza­tion of vul­ner­a­ble banks needs to be ad­dressed. “To achieve sus­tained and in­clu­sive growth, short­term macroe­co­nomic mea­sures must be com­ple­mented by sig­nif­i­cant struc­tural and gov­er­nance re­forms.

The re­cently an­nounced en­ergy pol­icy will ad­dress the long-stand­ing prob­lems in the sec­tor, which constitute the most cru­cial con­straint on growth and have gen­er­ated large fis­cal costs. In ad­di­tion, the trade regime needs to be lib­er­al­ized, pub­lic sec­tor en­ter­prises need to be re­struc­tured or pri­va­tized, and the busi­ness cli­mate needs to be im­proved.

“Pro­tect­ing the most vul­ner­a­ble from the di­rect and in­di­rect im­pacts of fis­cal con­sol­i­da­tion and price ad­just­ments is a pri­or­ity. Cov­er­age and ben­e­fits of these pro­grams should be ex­panded as sav­ings from tar­iff ad­just­ments and fis­cal space are re­al­ized.”

Newspapers in English

Newspapers from Pakistan

© PressReader. All rights reserved.