The
International Monetary Fund (IMF) has completed a review of performance of
Pakistan’s economy. This has paved way for release of another tranche of US$500
million subject to the approval by the Fund's Board.
It is
encouraging to note that the Government of Pakistan (GoP) has managed to meet
all five covenants for the period ended 31st December 2015 as recent
foreign inflows amounting to US$2.4 billion helped in achieving US$9.3 billion NIR
target, while retirement of budgetary borrowing from SBP kept NDA below its prescribed
ceiling of Rs2.58 trillion.
Revenue
collection was slightly below the required target reflecting impact of recently
imposed duties. This helped the GoP to achieve targets for limiting budget
deficit to Rs625 billion, which remained a major concern in the last review.
However, GoP
was unable to meet structural benchmarks relating to PIA's privatization, where
news flows indicate further delay. While clarity in this regard should emerge
from the review report (likely to be released next month), low probability of
privatization being completed this year does not bode well and likely to constrain
fiscal space further, as Rs50 billion have been budgeted in FY16 under privatization
proceeds.
IMF has
maintained its positive tone on the country's economic outlook with optimism
driven from investments under CPEC, higher construction activity and lower oil
prices. However, weak agricultural output this year with low cotton production
(down 33%) is a key risk where the Fund has reiterated its GDP growth
projection at 4.5%. Inflation level is projected at 3.7% for FY16.
The news
flows indicate a possible delay in privatizations of both PIA and power entities
by GoP but the Fund has remained silent on the future course for privatizations
- contrary to the last review where the IMF emphasized on it. The clarity on
Fund's stance on privatization is likely to emerge from the review report to be
released late next month.
There is strong
perception that Pakistan will get the money irrespective of meeting or not
meeting the agreed targets due to the support of its western allies, and neighbors
Afghanistan and India. Analysts openly express fears that an economic meltdown
could further destabilize the atomic power having a population of over 200
million, suffering from looking power shortages, wide spread corruption and
ever growing militancy.
Fragile economy,
energy crisis, corruption, militancy
