New Delhi, July 9: Shoved off from the ‘Most Favoured Nation’, grey-listed by the Financial Action Task Force for not abiding by the action plan on terror funding, the state of Pakistan has been duly isolated by all. Dwelling in facing ‘significant economic challenges’ because of its weak and unbalanced growth, Pakistan’s economy is at a critical juncture where it needs an ambitious and bold set of reforms asserted International Monetary Fund.
The cash-strapped Pakistan, which currently has a currency reserve of less than $8 billion enough to cover only 1.7 months of import has approached the Washington-based International Monetary Fund (IMF) in August 2018 for a bailout package after the Imran Khan government took over. The global lender (IMF) last week formally approved the $6 billion loan to Pakistan.
Last week, the IMF approved the 13th bailout package for Pakistan since the late 1980s. The latest bailout package is worth $6 billion, of which $1 billion is to be disbursed immediately and the rest in the next three years. According to the IMF officials, achieving the fiscal objectives will require a multi-year revenue mobilisation strategy to broaden the tax base and raise tax revenue in a well-balanced and equitable manner.
In an accompanying report, the IMF said that Pakistan's economy is at a critical juncture. The legacy of misaligned economic policies, including large fiscal deficits, loose monetary policy and defence of an overvalued exchange rate, fuelled consumption and short-term growth in recent years, but steadily eroded macroeconomic buffers, increased external and public debt, and depleted international reserves.
Structural weaknesses remained largely unaddressed, including a chronically weak tax administration, a difficult business environment, inefficient and loss making state-owned enterprises, amid a large informal economy.
Pakistan has so far received billions in financial aid packages from friendly countries like China, Saudi Arabia and the UAE during the current fiscal year.