core sector communique

Statement by an IMF Mission on Pakistan

November 22, 2011

An International Monetary Fund (IMF) staff mission, led by Mr. Adnan Mazarei, met with the Pakistani authorities in Dubai and Islamabad November 9-19 to conduct the 2011 Article IV consultation¹. The mission issued the following statement at the conclusion of the meetings:

“The Pakistani authorities and an IMF staff team held constructive discussions on Pakistan's recent economic performance and the challenges ahead, in light of uncertainties in the global economic environment. The authorities expressed their resolve to strengthen macroeconomic policies and continue to pursue reforms to enhance Pakistan’s medium-term growth prospects. The outlook for 2011/12² is challenging. Although real GDP growth is projected at about 3½ percent and inflation is projected to decline, the external current account balance is projected to return to a deficit, and global risk aversion and security concerns may limit capital inflows.

“Against this background, discussions centered on short-term steps to address vulnerabilities. Specifically, the Pakistani authorities and the mission agreed that containing the budget deficit in 2011/12, a cautious monetary policy, and a responsive exchange rate would reduce vulnerabilities, contain inflation and protect Pakistan’s international reserves.

“The Pakistani authorities and the mission also discussed a set of reforms for the medium term that would lift economic growth to reduce poverty, and raise living standards and employment, while assuring continued macroeconomic and financial sector stability. These include structural reforms to remove constraints to growth, especially in the energy sector, and strengthen public finances, including tax reform, improving the quality of expenditure by raising the share of spending in priority areas such as health, education, and infrastructure, manage fiscal decentralization, and improving debt management. Additionally, reforms to improve the effectiveness of financial sector intermediation, broaden access to finance, and reinforce financial sector stability should also continue.

“The mission benefitted from a seminar Revival of Economic Growth in Pakistan that was organized jointly with the Ministry of Finance. This seminar provided an opportunity for stakeholders in Pakistan from academia, civil society, the private sector, and development partners to discuss components of a pro-growth reform strategy.

“The IMF remains committed to continued close engagement with Pakistan. The IMF mission staff will prepare a report for the IMF Executive Board on the 2011 Article IV consultation that is scheduled for consideration in late January 2012.”

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¹ Under Article IV of the IMF's Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country's economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board. At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country's authorities.

² Pakistan’s financial year runs from July 1 to June 30.