Pakistan’s reliance on International Monetary Fund (IMF) is about to end in the future. IMF’s Resident Representative to Pakistan, Tokhir Mirzoev, said that Pakistan can address its external and fiscal imbalances on its own and will not need the support of IMF in the future. However, Islamabad should maintain an external buffer and come up with the right policy mix, he added.
Mirzoev has urged the government to bring in new policies immediately in order to bring stability to the external sector. He said that external and fiscal imbalances of the country has increased over the past year and need immediate attention from the policymakers so that the growth momentum that Pakistan has achieved can be continued in the future as well.
Policies implemented by stakeholders in the near future will take time to have an impact on the economy, Mirzoev argued. Stressing on the importance of making correct decisions as soon as possible, Mirzoev speculated that Pakistan might have to turn to IMF in future to seek help with the increasing current and budget account deficits.
Current account deficit touched an all-time high of $12.09 billion in FY 2017, increasing by a whopping 148% as compared to the preceding fiscal year, in which the deficit was only $4.86 billion. Mirzoev has made it clear that it won’t be easy for Pakistan to achieve its targets this year and might need to find solutions to the deficiencies of its fiscal system.
The government of Pakistan is exploring various options to increase custom duty on imported goods so as to earn more revenue through the increased duty. This will also help them curtail the ever-growing trade deficit. But introducing such policies will have its own impact as it can hamper the trade relations of Pakistan with other countries.
The increase in rates means an increase in the price of the goods and thus the end consumer will be forced to either switch to a domestic product or find any other substitute in the market. Even Mirzoev believes that increasing the customs duty will not be effective in the long-run, as such administrative decisions are not effective for the economy.
Pakistan’s economy in the month of August showed slight recovery with increase in exports, foreign direct investment, and remittances. Exports in the month of August increased by 15% as compared to July while imports also decreased by approximately 8% in August as compared to July. However, Mirzoev believes that only time will tell whether things are starting to recover or the month of August was an exception for the economy.