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Downside Risks For Pakistan’s Economy Remain Exceptionally High: IMF

The International Monetary Fund (IMF) said on Friday that downside risks for Pakistan’s economy remain exceptionally high.

In its staff report which was released after the second and final review of Pakistan’s $3 billion loan program, the IMF said political uncertainty in Pakistan remains significant even though the new government has indicated its intention to continue the standby arrangement (SBA) policies.

The lender noted that a resurgence in social tensions (reflecting the complex political scene and high cost of living) could weigh on policy and reform implementation. Policy slippages, together with lower external financing, could undermine the narrow path to debt sustainability and place pressure on the exchange rate.

Delays in post-program external financing disbursements would also place further pressure on banks to finance the government (further exacerbating crowding out of the private sector). Geopolitically- driven higher commodity prices and disruptions to shipping, or tighter global financial conditions, would also adversely affect external stability, IMF added.

It is pertinent to mention here that an IMF Mission lead by Nathan Porter will visit Pakistan next week to discuss a new loan program.

The IMF team’s visit is expected to last over 10 days. The lender will gather data from various departments and negotiate with the Finance Division on the upcoming budget for the fiscal year 2024-25.

So far, the IMF has suggested phasing out tax exemptions, including sales and income tax concessions, and imposing taxes on imported tractors, and withholding taxes on commercial importers. While these measures could boost government revenue, concerns remain about their impact on agricultural costs.

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ProPK Staff