She was speaking at online policy dialogue titled ‘IMF support to Pakistan under RFI, Existing EFF program, and Debt Rescheduling’ organized by the Sustainable Development Policy Institute (SDPI) here.
She said IMF was happy the way Pakistan was implementing different policies to achieve fiscal consolidation and macroeconomic stability, adding the performance of Pakistan’s economy prior to the emergence of Covid-19 and its devastating impacts, had been quite satisfactory.
Ms Sanchez apprised of IMF's toolkit to fight the COVID-19 shock that included the Rapid Finance Instrument which Pakistan would be utilizing, according to SDPI press statement.
She noted that the IMF’s assessment of the situation was that COVID 19 would reverse the decline in public debt that resulted from fiscal consolidation efforts.
This would also result in increase of primary deficit.
She appreciated the government's decisive response to COVID19, including cash transfers to most vulnerable families, lowering down policy rate, eliminating import duties on several items, and other initiatives to provide relief for the low income segments of society.
Commenting on opening up of construction sector, she said IMF supported opening of labour intensive sector where daily wagers may be absorbed.
However, she hoped that amnesty announced for investment in construction sector was temporary in nature, and would be withdrawn once situation becomes normal.
“The IMF recommends that Pakistan as well as other countries recalibrate their policy actions as we move on. Therefore, the regulatory measures taken are temporary and regulatory relaxation might not be necessary in the future as it can create problems”, she added.
She said the ongoing existing fund facility (EFF) program was very much intact, adding that IMF was working closely with the authorities in Pakistan and the next review mission may take place virtually.
Regarding the EFF, she said, as the medium term economic outlook was changing, the IMF had to recalibrate everything from targets to trajectories.
However, we need to continue working on EFF as a framework as the program provided continuity along with a healthy and sustainable trajectory from an economic point of view.
“It is encouraging that the GOP is committed to fiscal consolidation and reforms once the things get normal”, she added.
While commenting on the overall impacts of Covid-19 on Pakistan’s economy, she said there would be a significant cut in imports from Pakistan from various countries, the remittances would get reduced, tax collection would reduce considerably and the growth rate may get reduced to -1.5%.
It is in this context, funds under RFI arrangement would help Pakistan to bridge the gap in immediate financing needs. Going forward, in post COVID19 times, she added, “The IMF is working to make Pakistan as competitive and open as possible by making it more export oriented and an attractive destination for investment.”
Speaking on the occasion, Executive Director, SDPI, Dr Abid Qaiyum Suleri highlighting Pakistan’s recent engagements with the IMF, said that COVID19 had brought socio-economic uncertainties with a lengthy period of emergency response that would result in global recession.