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Press Release: IMF Staff Concludes Seventh Review Mission Under an EFF with Pakistan

Press Release No. 15/206 May 11, 2015

End-of-Mission press releases include statements of IMF staff teams that convey preliminary findings after a visit to a country. The views expressed in this statement are those of the IMF staff and do not necessarily represent the views of the IMF’s Executive Board. Based on the preliminary findings of this mission, staff will prepare a report that, subject to management approval, will be presented to the IMF's Executive Board for discussion and decision.

An International Monetary Fund (IMF) staff mission, led by Harald Finger, visited Dubai and Islamabad from May 1-11, 2015 to conduct discussions on the seventh review under the SDR 4.393 billion (about US$6.6 billion) Extended Fund Facility (EFF) arrangement with Pakistan, approved by the IMF’s Executive Board on September 4, 2013 (see Press Release No. 13/322). The mission met with Finance Minister Ishaq Dar, State Bank of Pakistan (SBP) Governor Ashraf Wathra, and other senior officials.

At the end of the mission, Mr. Finger issued the following statement:

“The mission and the Pakistani authorities have reached staff-level agreement on a Memorandum of Economic and Financial Policies on the seventh review under the EFF arrangement, which, upon management approval, will be considered by the IMF Executive Board in June.After completion of this review, SDR 360 million (about US$506 million) will be made available to Pakistan.

“Pakistan’s economy continues to gradually improve, helped by macroeconomic stability, lower oil prices, robust remittances, and higher supply of gas and electricity. Real GDP growth is expected to reach 4.1 percent this fiscal year and accelerate to 4.5 percent next year. Average headline inflation dropped to 2.1 percent in April, but is expected to increase in the coming months reflecting the stabilization in international petroleum prices following their recent decline.

“Regarding the program, all end of March performance criteria have been met, including on the budget deficit and accumulation of net international reserves. The indicative target on social spending under the Benazir Income Support Program was also met. While the indicative target for federal tax revenue was missed by a small margin, due to legal challenges to some measures and the adverse impact of declining commodity prices, the authorities are taking measures to meet the end-June budget deficit target (4.9 percent of GDP). The mission welcomed the authorities’ plans to further reduce the fiscal deficit in 2015/16, while accommodating extraordinary expenditures related to flood rehabilitation, security enhancements to fight terrorism, and resettlement of internally displaced persons.

“The authorities’ reform program has reached its mid-point, and already produced important economic achievements: near-term risks have receded, foreign exchange buffers have been rebuilt, and the budget deficit has narrowed substantially. To protect the most vulnerable, the authorities have significantly expanded the Benazir Income Support Program, enrolling over one million new recipients and increasing stipends by 50 percent.

“In an environment of low international oil prices, these achievements present a unique opportunity to continue strengthening public finances and overcome obstacles for higher investment, jobs and growth. Key priorities for the second half of the program include improving the energy sector; widening the tax net to create space for infrastructure investment and social assistance; improving the business climate; and further strengthening external reserve buffers. Strong implementation of reforms in these areas, as envisaged in the program,will transform Pakistan into a dynamic emerging market economy.

“The mission thanks the authorities and technical staff for their continued cooperation and reaffirms the IMF’s support to the government’s efforts to implement their economic reform program.”