Islamabad -- International Monetary Fund (IMF) has projected that Pakistan's current account deficit (CAD) would narrow to 2.4 percent in ongoing fiscal year due to the reduction in trade deficit.
The IMF in its recent report on Pakistan economy estimated that Pakistan's CAD would reduce to 2.4 percent of the GDP in current fiscal year as against 4.8 percent of the GDP in previous financial year. Earlier, the Fund had projected the country CAD at 2.6 percent for the year 2019-2020. However, the IMF had downward its estimate to 2.4 percent after CAD had reduced by around 74 percent in first quarter of the present fiscal year.
On the completion of first review of Pakistan's economic performance, IMF has acknowledged that Pakistan's reform program is on track and already producing results, said the finance division in a statement here Sunday.
According the Division, the IMF report acknowledges that the business climate has improved, and market confidence is returning, the finance division added. IMF further adds in its assessment that the Government recognizes that structural reforms, especially in SoE sector are key to revive economic activity and growth.
The report has confirmed that End-September performance criteria (PCs) were observed with wide margins. These include, Zero budgetary borrowing from SBP, Primary budget deficit ceiling, Ceiling on government guarantees, Zero external public payment arrears, SBP net international reserves (NIR), net domestic assets (NDA), and swaps/forwards targets all met. In addition to above, all structural benchmarks (SBs) for end-September, except the SB on AML/CFT, were completed, said the statement.
With regard to inflation outlook, IMF has lowered Inflation projection for FY20 to 11.8%, down from 13% earlier on account of this fact that the administrative and energy tariff adjustments are expected to offset the effects from weak domestic demand. Thereafter, inflation is expected to converge to 5-7%.
The report confirms that inflation has been started to stabilize, along with core inflation, and the SBP stance is appropriate (no need for further rate hikes).
However, we are of the view that we will do much better than IMF projection, the finance division claims. As inflation during Jul-Nov was 10.8% and with measures taken we target to bring inflation down to 5% over the medium term.
With regard to the external sector, significant improvement has been witnessed. Overall, Current Account Deficit (CAD)...