Pakistan has potential to become world top emerging economy: Lagarde

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Managing Director IMF, Christine Lagarde said that during her discussion with the government representatives, she highlighted that achieving higher and more sustainable growth would also require completing important structural reforms in the energy sector and tax policy and administration. She said that for sustainable growth there was need to plug losses in public enterprises and making a sustained effort to improve governance and offer a dynamic and export-oriented private sector. The MD IMF said that Pakistan needed to rely on the strength of its own policies to generate more jobs and improve living conditions. The main priorities , he said were to reinforce Pakistan’s economic resilience and put in place reforms for higher and more inclusive growth. In parallel, she added, focus on strengthening health, education, closing the gender gap and providing social protection can ensure that gains in living standards are widely shared. She was of the view that Pakistan’s economic transformation could not happen without the country’s youth, who comprise about 60 percent of the population. Responding to a question over how to overcome perceived or actual corruption, she said that transparency and accountability was the best recipe to overcome the menace while to another question, she said that reducing budget deficit and broadening revenue tax base would help grow resilient and sustainable economy. To yet another question, she said that there was no loan programme in pipeline, however added that cooperation between IMF and Pakistan would continue. She also highlighted the importance for taking multi-prong measures to promote exports and also stressed the importance to regional tarde initiatives. She also condoled the tragic loss of lives in Quetta attack, saying, “we are deeply sorry for families of those who lost their lives in the attack.” Meanwhile addressing on the occasion, Finance Minister, Muhammad Ishaq Dar said that it was historic that Pakistan has successfully completed the three years IMF programme. He said that it was the election manifesto of the Pakistan Muslim League Nawaz (PML-N) was to focus on four Es (Economy, Energy, Education and Health and eliminate Extremism) and it has carried on this policy. He said that the economy has been turned around and now focus was on increasing growth and job creation. Responding to various questions, the Finance Minister dispelled the impression that there was 4 percent increase in tax to GDP rate, clarifying that the ratio increased due to elimination of SROs and introduction of reforms programme. He said that there has been considerable decrease in budget deficit and expressed the hope for further decline in it. To a question related to upcoming PTI protest programme, the minister said that law would take its course, adding that nobody was above constitution and law. The Finance Minister said that government has increased it spending on Public Sector Development Programme (PSDP) from Rs.300 billion in 2013 to Rs.800 billion in 2016. Similarly , he said that on social safety net the present government has enhanced its allocations manifold.

ISLAMABAD, Oct 24 (APP): IMF Managing Director Christine Lagarde
on Monday appreciated Pakistan’s economic agenda saying the country was in ‘better fiscal position’ and had the potential to become top emerging economy of the world.

The International Monetary Fund (IMF) chief also lauded the government for coping with multiple challenges and achieving macroeconomic stability in a short period of three years.

She was addressing a seminar on “emerging markets in the world
economy” organized by State Bank of Pakistan (SBP) here at a hotel. Finance Minister Senator Muhammad Ishaq Dar and SBP Governor Ashraf Mehood Wathra also addressed the seminar.

Lagarde said,”Pakistan is now in a better fiscal position and certainly out of economic crisis.”

She said before the present government came into power, Pakistan’s economy was in severe crisis. However, due to the IMF funded programme and owing to the government’s prudent reforms agenda, the country had achieved macroeconomic stability. It successfully completed the three year Extended Fund Facility (EFF) programme with the IMF.

She assured that the IMF would continue to support Pakistan technically in its efforts to make the country on the path of higher economic trajectory.

Due to the economic reforms, she said, Pakistan’s foreign exchange
reserves had improved, fiscal deficit had come down and circular debt had reduced significantly, besides increase in tax base and revenue collection.

She stressed the need for promotion of women education and equal
job opportunities, besides access to credit and business market which would help boost the country’s economy.

“Women are the game changer for Pakistan,” she remarked.

Quoting Quaid i Azam Muhammad Ali Jinnah’s saying of ‘Faith, Unity and Discipline’, she said if those principles were followed the country would lead to the path of economic prosperity.

Christine Lagarde said 60 per cent of 180 million population of
Pakistan were youth and if their potential was fully exploited the
would country would progress teremendously.

The IMF Chief said,”This is an important time a moment of
opportunity for Pakistan, a country undergoing an economic
transformation that can place it well among the ranks of emerging market economies.”

She said hard work and reforms were starting to pay off.

“Pakistan, was recently upgraded from a frontier economy to an emerging market in the MSCI index,” she said adding that it was an important signal given a changing global landscape, especially for emerging and developing economies.

Over the past few years, economic dynamism in the world economy
she said, had gradually been shifting from advanced economies to
emerging markets.

Today, she said, these countries were home to 85 per cent of the
world’s population, and account for almost 60 per cent of global GDP
up from just under half only a decade ago.

While the global recovery had been subdued, emerging economies
have contributed more than 80 percent of global growth since the crisis, she added.

The IMF chief said Pakistan needed to rely on the strength of its
own policies to generate more growth and jobs, and to join the group of dynamic emerging markets.

Highlighting the world economic scenario, she said that overall,
global growth had been too low, for too long, and in many countries had benefitted too few people.

“Our forecasts for world growth are 3.1 per cent this year and 3.4
per cent next year well below the 3.7 percent average for nearly two decades before the 2008 financial crisis,” she added.

Underlying this picture is a complex set of factors, she said in
advanced economies, despite signs of recovery in some countries, overall growth prospects remained subdued while many of them were still dealing with crisis legacies high debt, low inflation, and low investment but also higher uncertainty.

Low growth and uncertain prospects were feeding into populist and
inward looking attitudes adding “what we see today in many places is that belief in an open global system is being tested”.

She said it was precisely that open economic architecture that had brought so many benefits to the world, especially for emerging and developing economies including Pakistan. “Over the years, we have seen
child mortality go down, and life expectancy increase. Absolute poverty
has declined, and school enrollment is on the rise. All this is evidence
of a broader trend of economic convergence between poorer and richer nations.

“Today, this convergence trend is slowing and the emerging market group will continue to grow at 4.2 per cent this year and 4.6 per cent
next year.

“The growth advantage over advanced economies is smaller than
before.”

The IMF Managing Director said China and India were growing at
about 6 7 per cent, while Brazil and Russia were showing signs of improvement after a period of severe contraction.

Low commodity prices, especially oil, have hit commodity exporters hard, and in the Middle East, countries continue to struggle with ongoing conflicts and terrorism, she added.

Ms Lagarde said emerging markets were also undergoing transitions
of their own shifts that create challenges but also opportunities.

She mentioned about the two things particularly relevant for Pakistan that the first transition was in China while the world’s second largest economy was rebalancing its economy from manufacturing to services, from investment to consumption, and from exports to domestic services.

This means a slower but more sustainable growth path, she added.

This transition, however, she said was not without ripple effects especially through trade.

She said China was now among the top ten trading partners for over
100 economies that accounted for about 80 per cent of the world GDP.

“It is also Pakistan’s third largest trading partner accounting for close to 20 perc ent of overall trade. So clearly, a slowing Chinese economy means fewer exports from Pakistan,” she added.

“Yet there is also good news. As China moves up the value added
chain, it will reduce its production of some labor intensive goods. This
is an opportunity for countries such as Pakistan, but Pakistan will need
to re tool its economy and train its people to realize this advantage,”
she added.

Pakistan, she said, “also stands to gain from the second transition
the decline in oil and other commodity prices. At the global level, the
fall in oil prices created winners and losers.:

The IMF Chief said income was redistributed from heavy exporters
such as Saudi Arabia and Russia to net importers such Pakistan, India,
and many others.

In the case of Pakistan, she said a much lower oil import bill
drove a marked improvement in the country’s external balances and
benefitted consumers and businesses.

“Still, faced with such a drastic fall in prices and rising financial pressures, many of the commodity exporters had to adjust and growth slowed. This is the case for the GCC countries. As a result, the growth of remittances from GCC countries, which account for nearly two thirds of total such inflows to Pakistan, also slowed”, she observed.