Pakistan needs to reduce its current account deficit: IMF

The International Monetary Fund (IMF) has urged Pakistan to control its current account deficit while Prime Minister Shahbaz Sharif governme...

The International Monetary Fund (IMF) has urged Pakistan to control its current account deficit while Prime Minister Shahbaz Sharif government wants to increase and expand its program with the IMF.

 

Finance Minister Muftah Ismail met with IMF officials last week; file / photo:MAK NEWS-21

"Our team will examine the new government's policy priorities and the impact on the economy in light of the war in Ukraine," said Jihad Azor, director of the IMF's Middle East and Central Asia department, according to Reuters.

 

Read more: All agreements made with IMF will be fulfilled, Muftah Ismail

"But over the last few months, we have been emphasizing the importance of controlling the current account situation and reducing the current account deficit," he said.

He did not elaborate on the policy actions, but the IMF had earlier said that the exchange rate set by the market and the continuation of effective macroeconomic policy would help reduce the deficit.

It may be recalled that Pakistan's current account deficit has increased to 13 13.2 billion in the first nine months of the current financial year, from 275 million a year ago before the rise in oil import prices.

Rating agency Moody forecasts that the deficit will widen to 5 to 6 percent of GDP by the end of the current fiscal year on June 30, from the earlier forecast of 4 percent and this will put pressure on Pakistan reserves. There will be more.

Also read: Petrol price not rising immediately: Muftah Ismail

The new government faces the worst economic challenges, with its fiscal deficit set to exceed 10% of GDP by the end of this fiscal year.

Finance Minister Muftah Ismail had earlier this week said that Pakistan had negotiated with the IMF for a 6 billion increase in the program.

Asked about specific measures to be taken on oil and gas subsidies to Pakistan, Jihad Azor, director of the IMF's Middle East and Central Asia Department, said that he would visit Pakistan in May to discuss these issues. The occasion will be discussed.

"We will talk about these issues and that is why I will not talk about these talks in advance," he said.

Talking to media in Washington along with Minister of State Ayesha Ghous Pasha and Pakistan's Ambassador to the US Masood Khan after meeting with IMF officials, Finance Minister Muftah Ismail said that we need to improve the conditions of IMF and Pakistan's economic position. Will have to make difficult decisions.

He said that the government of Pakistan has never defaulted in the last 70 years and there is no danger of default.

Read more: IMF demands change in personal income tax

He said that it is true that the budget deficit of the country is very high, the debt of the country has increased a lot, we will try to minimize the deficit and increase the national income.

Muftah Ismail said that our government will not make any plan for social welfare, we will start work on increasing the number of factories in the country so that there are less anchorages. He said that we should give targeted subsidy, not every vehicle owner should be given subsidy on petrol, we cannot afford to do that.

He said that we are trying to leave more foreign exchange reserves when we leave the government. Shahbaz Sharif got foreign exchange reserves of 10.8 billion dollars. We will try to get that when we leave the government. If there are more reserves than that, we got a growth rate of 4%, we are trying to leave it higher and also leave the rate of inflation below the level of PTI government.

Muftah Ismail said that the SBP has been given full autonomy as per the condition of IMF. We are bound to fulfill the agreements made by Imran Khan government because these agreements were not made by Imran Khan but by the government of Pakistan. ۔

The finance minister said that he had requested the IMF to take the program forward.