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Pakistan’s Economy Reaches Pivotal Point, Medium Term Outlook Positive: IMF

ISLAMABAD:  After two years of painstaking efforts, Pakistan’s economy has reached a pivotal point where national consensus is needed to move ahead with privatisation and restructuring of loss-making enterprises, said the International Monetary Fund (IMF) representative in Islamabad on Friday.

“The key decision to advance structural reforms now requires political dialogue and public discussion to achieve national consensus,” said IMF Resident Representative to Pakistan Tokhir Mirzoev while speaking to the media.

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Mirzoev comments come at a time when parliament is debating the Pakistan International Airlines (PIA) privatisation bill and the government seems to be back-pedalling on privatisation of power distribution companies.

He has spoken just days before Pakistan and the IMF are going to lock in negotiations for the 10th review of Pakistan’s economy for the period October-December 2015. Finance Minister Ishaq Dar has already stated the country has successfully met five performance criteria – the key conditions of the $6.2 billion loan programme.

“It’s a pivotal moment for the economy because the medium-term outlook is very positive,” said Mirzoev.

“However, the outlook is contingent upon sustained implementation of reforms,” he said while seeking the backing of all political forces and the people for privatisation of loss-making enterprises.

He said Pakistan’s programme has already achieved quite a lot in the past two years and a number of big-ticket and difficult reforms that were thought to be impossible have been implemented.

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He said the privatisation programme has also progressed quite a bit in the past two years. “Many privatisations are at various stages of implementation and in most cases, technical work has been done. Any further progress may need a broader political consensus.”

In the case of PIA, he said moving ahead with attracting the strategic investment required an amendment to the PIA Act.

“It is a critical moment in this reform and achieving national consensus is in the best interest of Pakistan on how to address concerns of members of parliament and labour unions while allowing the process to proceed would be important.

“In the absence of strategic investment in the company, it is important to consider the alternative and the budgetary implications,” he added.

The IMF has set June 2016 deadline for PIA privatisation.

About the privatisation of Pakistan Steel Mills, he said most of the preparatory work had been completed. “Now it is a matter of concluding ongoing political dialogue between the federal and provincial governments and agreeing on the best way forward.”

In the energy sector as well, he said the government was close to completing the necessary preparatory work, including the recent determination of multi-year tariffs of Fesco and the planned determination of multi-year tariffs for Lesco and Iesco by the end of this month.

Mirzoev called the central bank autonomy, withdrawal of statutory regulatory orders and the systematic approach of going after non-filers of tax returns achievements of the $6.2 billion programme. He said the circular debt was accumulating at a slower pace and a plan is in place.

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Responding to a question, he said the three-year period for the IMF programme was long enough to roll over reforms. “The energy-sector reforms will take a much longer time than the IMF programme. Some of the reforms will be completed and some will be at various stages of implementation when the IMF programme ends in September this year.”

Furthermore, he said the IMF stood ready to support Pakistan beyond the current programme but it was up to the government whether it wanted to request such support or not.

Low oil prices helped build the foreign currency reserves to create a cushion against future shocks. According to the IMF’s latest report, the State Bank of Pakistan purchased $5.5 billion from the spot market under the IMF programme.

Published in The Express Tribune, January 23rd, 2016.

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