Eco­nomic ex­pan­sion to fur­ther slow­down: fore­cast EIU

Daily Messenger - - Biz -

KARACHI: Pace of ex­pan­sion of econ­omy of Pak­istan would go slower in the com­ing years, fore­cast a lead­ing eco­nomic fo­rum. The Econ­o­mist In­tel­li­gence Unit (EIU) has pro­jected Pak­istan’s econ­omy to ex­pand by an an­nual av­er­age of 2.9% in 2018/19?2022/23, com­pared with 5.4% pre­vi­ously. The ad­vi­sory is­sued by the EIU comes amidst Pak­istan’s on­go­ing ne­go­ti­a­tions with the In­ter­na­tional Mon­e­tary Fund (IMF) which com­menced on Novem­ber 7th and are ex­pected to con­clude by Novem­ber 20th.

EIU stated po­lit­i­cal con­sid­er­a­tions, es­pe­cially of the US may com­pli­cate the ne­go­ti­a­tions, but it ex­pected Pak­istan to clinch a $7 bil­lion IMF bailout pack­age by early-2019.

It added the gov­ern­ment would likely carry out struc­tural re­forms at the IMF’s de­mand; how­ever, their ex­tent will be lim­ited. Con­se­quently, due to an an­tic­i­pated re­duc­tion on pub­lic spend­ing, some projects un­der the Chi­naPak­istan Eco­nomic Cor­ri­dor (CPEC) would progress more slowly and isn’t likely to im­pact bi­lat­eral ties with China, said EIU. On the ex­ter­nal sec­tor woes, EIU said it an­tic­i­pated an im­mi­nent IMF pro­gramme to be am­pli­fied with other bi­lat­eral as­sis­tance and it would be the coun­try’s 13th bailout since the late 1980’s.

More­over, EIU be­lieved the PTI-led gov­ern­ment would find it dif­fi­cult to im­ple­ment its pop­ulist agen- da of ex­pand­ing so­cial wel­fare pro­vi­sion, which in­cludes promises of low­cost hous­ing and new jobs.

How­ever, it added the Wash­ing­ton-based lender’s core de­mand would be fis­cal con­sol­i­da­tion, akin to the ones made in pre­vi­ous bailouts ob­tained by Pak­istan. Also, it pro­jected the gov­ern­ment’s move to an­nounce a ma­jor de­crease in planned de­vel­op­ment spend­ing for FY19 and fur­ther cuts would likely bring the fis­cal deficit down.

It said aside from the re­cent in­creases in gas and elec­tric­ity tar­iffs, the IMF is likely to de­mand fur­ther rises to re­move price dis­tor­tions and man­age grow­ing ar­rears in the en­ergy sec­tor, which is dom­i­nated by pub­lic en­ter­prises.

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