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IMF report on economy

The report of the International Monetary Fund (IMF) on the $6 billion bailout to Pakistan is a damning indictment of the lopsided policies and insufficient policy action by incumbent Pakistan Tehreek-i-Insaf (PTI) and its predecessor Pakistan Muslim League-Nawaz governments, for the present day economic woes and critical financial trials the country is facing. The critical report details the economic landscape of the country and that how it can be corrected, and it is a must read for policymakers and the students of financial management. Without mincing the words, the report states, “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.”
In the five years of the PML-N government, development-oriented policies, all based on foreign and domestic loans, shook all economic balances, while no effort was ever made to plug the widening deficit gap. The term of the PML-N maintained GDP growth relatively fast and close to five per cent but on the other hand, macroeconomic liabilities went up in the wake poor policies – all pro-consumption- and pro-import growth. The five years of short-sighted fiscal policies led to a rapid swell in the fiscal deficit to 6.5pc of GDP, 2.5pc higher than budgeted, in 2018. Though, the exchange rate was kept stable but artificially. In all, the government kept playing to the gallery with short-sighted and short-term policies, eyeing the next term. The PML-N’s successor – the PTI – did equally bad in its first year in power. It seems the government has yet to come out of the honeymoon period. One year down the lane, the government is still in the process of making steering committees on the issues, when they come to the fore. The IMF report accuses the current PTI government of overdue and yet disappointing policy action for correction. Though the government can be credited with making the exchange rate free and coming up with significant monetary policy tightening, it should be accountable for making the things lopsidedly.
The report says, “Similarly, fiscal slippages in the first half of the fiscal year have been significant despite the adoption of two budget amendments. Finally, increases in power and gas tariffs have not been sufficient to stem the accumulation of quasi-fiscal losses.”
The IMF report suggests political stability and following the measures to avoid a potential blacklisting by the Financial Action Task Force for the future economic stability. The list could grow fat but what is the need of the hour is that the government starts setting its priorities right and begins working on them.



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