KARACHI, AUG 5 (APP): Immaculate use of IMF loan by the government of Prime Minister Nawaz Sharif, had words of appreciation even from Indian media.
“Pakistan successfully uses IMF bailout to boost growth with active aid from its iron brother China” was the headline of a news item Friday of Times of India, one of the largest newspapers.
Pakistan may be in trouble because of the political reasons. But fortunately for its economy, the government seems to have effectively used its $ 6.6 billion bailout package extended by the IMF in 2013 to reboot growth.
According to the preliminary report of the final review mission of the IMF, Pakistan has not only made significant progress in achieving macroeconomic stability but also laid the foundation for moving towards higher more inclusive growth.
Appreciating the economic activities rejuvenated by present government with a number of corrective initiatives, the paper said “ Pakistan’s GDP growth is expected to touch 5% in 2016-17 while its prudent monetary policy is estimated to hold inflation rate at 5.2%.”
The GDP growth is in line with the medium terms targets set by the IMF programme three years back and the improvements in the inflation and foreign exchange segments even exceed the expectations.
When the IMF package was rolled out GDP growth had averaged only 3% and the foreign exchange reserves had shrunk to just $ 6 billion, dropping by half in just one year even as inflation levels touched a new high of 8.3%.
Regulatory reforms and better performance of the energy sector, helped by the dip in fuel prices, have improved the electricity sector. Some progress has also been made in disinvesting ailing public sector enterprises.
The country has been also able to prop up the number of beneficiaries under various welfare schemes. However, what is surprising is that the country has been able to improve growth rates from 4% to 4.7% and further to 5% over the last three years despite the fall in merchandize exports.
However, exports are expected to rebound to 4.1% in the current year.
One reason for the buoyant growth is the sharp surge in construction activities in the economy, aided by the improved flow of credit from the banking sector and also due to the sudden upturn in investments in the China Pakistan Economic Corridor where projects estimated to cost $44 billion are expected to be rolled out including $ 10 billion in infrastructure and $ 34 billion in energy, the Times of India stated.
Certainly the Chinese investments have come as a bonanza to the Pakistan economy even as its financiers in the Middle East wobble from the crash in oil prices and that from the United States start having second thoughts. Progress on some of the projects have been fast enough to ensure that a few are completed within the year. Estimates show that once the promised Chinese investments are fully implemented it will amount to more than double all the FDI into China since 2008.
Thus the Chinese support seems to have finally emerged as a key source of ensuring more stability in Pakistan economy.
This is a far cry from the days when aid from the United States and Middle East countries had been the main source of stability in the Pakistan economy and is certainly a pointer to the days to come, the paper concluded.