KARACHI: International Monetary Fund (IMF) on Wednesday said that exchange rate in Pakistan reflecting actual economic conditions.
Gian Maria Milesi‑Ferretti, Deputy Director, Research Department, IMF in question/answer said that Pakistan had started implementing an ambitious program with the IMF.
“And we think there are good signs on the confidence front, with increased demand for local currency assets by foreign investors in light of the fact that we now have an exchange rate that is more reflecting actual economic conditions, with some degree of floating.”
“There is need for a substantial fiscal adjustment.” The deficit over the last year has exceeded expectations.
“Fortunately, this has been the case mostly for one‑off reasons, and tax revenues are picking up notably. But, of course, when you do have a fiscal adjustment ongoing, domestic demand is going to be compressed.”
Hence, we have a forecast for the growth rate that, in the short run, is going to decline: 3.3 in 2019, 2.4 in 2020, but pick up after that, the IMF said. “And we think there are good signs on the confidence front, with increased demand for local currency assets by foreign investors in light of the fact that we now have an exchange rate that is more reflecting actual economic conditions, with some degree of floating.”
The authorities have been steadfast in their implementation of the program. Challenges remain, of course. It is a set of macroeconomic imbalances that needs to be addressed. There are uncertainties.
There are others, oil prices. Pakistan is a large oil importer and, hence, very sensitive to what happens to oil prices.
So far, we have seen good signs. And we hope that there will be a notable pickup in growth over the medium term, which is sorely needed in Pakistan to lift the living standards.
