Pakistan economic recovery picking up: IMF

WASHINGTON: Pakistan’s economic growth has started recovering despite security and energy challenges and the country met almost all targets under the International Monetary Fund program, the global financial institution said Tuesday.

“Pakistan’s program is progressing well,” the Fund said in a statement following “constructive discussions” with Pakistani officials focusing on Pakistan’s recent economic performance, the outlook for the rest of the fiscal year.

Adnan Mazarei, who met with the Pakistani officials in Dubai over the past week to initiate discussions on the fourth review under Pakistan’s Stand-By Arrangement (SBA), noted that Islamabad observed all quantitative performance criteria for end-December 2009, except for the budget deficit target, which was exceeded by a small margin.

Listing positive trends Pakistan registered in recent months, the Fund said the exchange rate has remained stable at Rs. 84–85 per U.S. dollar and the international reserves position has strengthened (the banking system’s gross foreign exchange reserves, including the State Bank and commercial banks, reached US$14.3 billion in mid-February, of this total the State Bank held US$10.5 billion).

The early signs of recovery in some sectors and the improved external position are encouraging, although there are risks and challenges to Pakistan’s economic program.

“Economic growth in Pakistan is starting to recover; large-scale manufacturing output has started to increase, the improvement in the global economy has helped manufacturing exports, and private sector credit growth has picked up somewhat as businesses rebuild their working capital.”

The IMF’s package for Pakistan - approved in November 2008-has been extended to $11.3 billion.

Looking ahead, the IMF statement said, a resumption of higher growth is needed to raise living standards and will require improvements in the business climate to stimulate higher investment by local and foreign investors.

The financial institution also noted that the “resolve of the Pakistani authorities to implement their stabilization and reform program is a key factor in deepening macroeconomic stabilization, despite the risks associated with internal security and uncertainty as to the pace of global economic recovery.”

Emphasizing the need for stepped up donors support for the key anti-terror partner of the international communityy, the Fund said early disbursement of donor financing remains crucial to support Pakistan’s stabilization and reform efforts and laying the basis for a high and sustainable growth.

The IMF mission staff will prepare a report on the fourth review under Pakistan’s SBA that is scheduled for consideration by the IMF Executive Board in late March.