CPEC investments to help close Pakistan’s power deficit, boost GDP: IMF

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ISLAMABAD, Jul 15 (APP): International Monetary Fund has said that the investments under China Pakistan Economic corridor (CPEC) can help close Pakistan’s power deficit, significantly improve its fuel mix, and boost GDP by adding $13 billion in 7 years.
“The planned expansion of energy sector capacity could eliminate Pakistan’s 6GW generation capacity gap in 2016 as early as end-2018”, IMF said in its latest report on “Pakistan: Staff report for the 2017 article IV consultation”.
It said that in the process, Pakistan’s excessive reliance on
furnace oil would be significantly reduced and impact on GDP will
likely come in three stages: construction, power generation, and-
over time-second-round effects on broader economic activity due to
increased productivity, lower costs, and improved trade
connectivity.
The first two stages (direct contribution) could add about $13
billion to Pakistan’s GDP in the next seven years (4.7 percent of FY
2015/16 GDP). Second-round effects will likely accrue gradually and
could lead to a significant contribution in the long run, depending
on various other supportive factors.
The report however, proposed that realizing the
transformational potential of Pakistan’s investment program while
maintaining external stability will require supportive policy
action.
Building up foreign exchange reserves will be important to
cushion the period of increased BoP outflows. Strong and sustained
reform efforts aimed at raising exports by improving competitiveness
and the business climate will be critical to maintain long-term
external sustainability.
Bringing the power distribution sector to full cost recovery
will help secure the long-term sustainability of the energy
projects.
Furthermore, containing fiscal costs by limiting tax
exemptions, maintaining a supportive environment for all
investments, and a gradual phasing in of new external commitments
will help maintain macroeconomic stability and strengthen growth
sustainability, added the report.