Karachi, January 12, 2024 – The International Monetary Fund (IMF) has advised Pakistan to enhance revenue collection from non-filers to support social and development initiatives.
The announcement comes after the IMF’s executive board approved a $700 million tranche on January 11, 2024, emphasizing the need for additional measures to sustain economic stability.
The IMF applauded Pakistan’s robust fiscal performance in the first quarter of Fiscal Year 2024 (FY24) and acknowledged the federal government’s spending discipline, leading to the achievement of a primary surplus in line with quarterly program targets. However, persistent pressures, particularly from provincial spending, highlight the necessity for continued efforts in revenue mobilization and disciplined non-priority spending.
In a statement, the IMF emphasized the importance of broad-based reforms to enhance the fiscal framework. The key recommendations include mobilizing additional revenues, particularly from non-filers and undertaxed sectors, and improving public financial management. These reforms aim to create fiscal space for more substantial social and development spending.
Pakistan’s 9-month Stand-By Arrangement (SBA), approved in July 2023, aims to address domestic and external balances, providing a framework for financial support from multilateral and bilateral partners. The program focuses on implementing the FY24 budget, adopting a market-determined exchange rate, maintaining a tight monetary policy, and progressing on structural reforms in areas such as energy sector viability, state-owned enterprise governance, and climate resilience.
While macroeconomic conditions have generally improved, with a 2 percent growth expected in FY24, challenges persist, including elevated inflation. The IMF predicts that inflation, currently high, could decline to 18.5 percent by end-June 2024 with appropriate policy measures. Gross reserves have increased to $8.2 billion in December 2023, contributing to a broadly stable exchange rate. The current account deficit is expected to rise to around 1½ percent of GDP in FY24 as the economic recovery gains traction.
Antoinette Sayeh, Deputy Managing Director and Chair, acknowledged Pakistan’s progress under the Stand-By Arrangement, stabilizing the economy following significant shocks in FY2022-23. She emphasized the importance of sustained strong ownership to ensure ongoing momentum and the entrenchment of economic stabilization.
Sayeh highlighted the need for continued reforms, particularly in the power sector, maintaining a tight stance on inflation, adopting a market-determined exchange rate, and addressing issues in the financial sector. She stressed the importance of inclusive growth, protecting vulnerable populations through programs like BISP, and accelerating structural reforms to create a conducive business environment.
The IMF’s recommendations underscore the importance of Pakistan’s commitment to economic reforms to ensure sustained growth and stability over the medium term.
