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Business Recorder
15-07-2025
- Business
- Business Recorder
Policy mix to forestall boom-bust syndrome
EDITORIAL: The Governor State Bank of Pakistan while speaking at the launch ceremony of Women Entrepreneurs Finance Code stated that unlike in the previous boom-bust cycles the current policy mix is conducive to lasting rise in economic activity rather than a short-sighted, fragile and populist sugar rush. This observation is backed by an optimism displayed in the last four Monetary Policy Statements (MPS). It is significant that the 11 September 2024 International Monetary Fund (IMF) staff report for the 2024 Article IV consultations and request for an Extended Arrangement under the Extended Fund Facility noted that: 'Economic volatility has only increased over time, with a tight correlation between Pakistan's boom-bust economic outcomes and its macroeconomic policies. The repeated attempts to boost economic activity through fiscal and monetary stimulus have not translated into durable growth, as domestic demand increased beyond Pakistan's sustainable capacity, resulting in inflation and depletion of reserves, given a strong political preference for stable exchange rates. Each subsequent bust has further harmed Pakistan's policy making credibility and investment sentiment.' Tellingly, a detailed analysis by the Fund led to the conclusion that these cycles lead to recurrent balance of payment crises, and what the Governor would do well to note is that the discretionary monetary policy (an example being the demand for a low discount rate to jump-start private sector borrowing that in turn would raise industrial output and growth) induces boom-bust inflation cycles and significantly hinders economic growth. The 16 June 2025 statement issued by SBP maintains that 'the MPC anticipates the industry and services sectors to continue to drive economic growth in FY26. This assessment is supported by the sustained momentum in high-frequency indicators — including credit to private sector, imports of machinery and intermediate goods, and business sentiments — and easing financial conditions,' with higher imports a key component of the boom-bust cycle; and the 5 May 2025 statement making the same optimistic observation, 'incoming high-frequency indicators suggest that economic activity is maintaining momentum, as reflected by rising sales of passenger vehicles and petroleum products (excluding furnace oil), increasing electricity generation, and improving business and consumer confidence.' However, these sentiments are not backed yet by corroborating macroeconomic data particularly large-scale manufacturing sector's growth rate that registered negative 1.52 percent July-April 2025 against 0.26 percent in the comparable period of the year before. And while credit to private sector did double from the 323.5 billion rupees July-June 2024 to 676.6 billion rupees in comparable period of 2025 yet the Governor has not yet refuted claims by independent economists that the rise in private sector credit is linked not to the output sector but to the stocks and securities sector. The Governor further noted that the government and the apex bank remain steadfast in transitioning from recently hard-earned economic stability to a medium term economic transformation adding that this resolve is reflected in (i) prudent and cautious monetary policy though there is no consistency in the rationale provided while taking key discount rate decisions leading to the conclusion that the decisions are made by the IMF staff; (ii) fundamentals aligned exchange rate which has remained steady against the dollar even when the dollar plummeted against all major currencies after President Trump announced the imposition of tariffs; (iii) ongoing fiscal consolidation with sustained above 75 percent reliance on indirect taxes for revenue whose incidence on the poor is greater than on the rich; and (iv) improving debt dynamics which have certainly improved due to a reduction in the discount rate from 21 percent in June past year to 11 percent this year though total debt to GDP has risen to around 76 percent. It is concerning that structural reforms continue to focus on raising revenue primarily through raising tax rates rather than amending the inequitable, unfair and anomalous tax structure, reducing debt by lowering the discount rate (which requires IMF approval) and the 1.2 trillion-rupee circular debt retirement indicates lower interest costs due to the lower applicable discount rate rather than any other management or structural reforms. Debt rescheduling as a means to resolving sustained macroeconomic distortions and inefficiencies is unlikely to generate a lasting rise in economic activity and the focus must now shift to on well-defined structural reforms. Copyright Business Recorder, 2025
United News of India
01-07-2025
- Business
- United News of India
IMF board enables disbursement of about $500 mln to Ukraine
Washington, July 1 (UNI) The IMF Board has approved a nearly $500 million disbursement to Ukraine following a review of the Extended Fund Facility program, the Fund announced in a statement on Monday. "The IMF Board today completed the Eighth Review of the Extended Arrangement under the Extended Fund Facility (EFF) for Ukraine, enabling a disbursement of about US$0.5 billion (SDR 0.37 billion) to Ukraine, which will be channeled for budget support," the IMF said. The IMF reminded that Ukraine's 48-month EFF program, approved in March 2023 with access to $15.5 billion, is part of a $152.9 billion international support package, which aims to stabilize the economy, support recovery, and strengthen governance and institutions. UNI SPUTNIK GNK 0829
Express Tribune
20-03-2025
- Business
- Express Tribune
'No hurdles in IMF agreement'
Listen to article The central bank governor, Jameel Ahmad, said on Thursday that there was no hurdle from the State Bank of Pakistan (SBP)'s side in reaching a staff-level agreement with the International Monetary Fund (IMF), and any outstanding issues might be related to the federal government. While talking to the media after a meeting of the Public Accounts Committee (PAC), the governor hoped that the staff-level agreement would be reached very soon with the IMF. However, he did not provide a firm date for the deal, which has been overdue since March 14. The PAC meeting also revealed that the federal government was about to give "emperor-like powers" to Federal Finance Minister Muhammad Aurangzeb to approve up to five special honoraria for employees and officers of various government departments. "There is no issue pending with us, and any outstanding issue might be on the part of the federal government," said Jameel Ahmad while responding to a question about the timing of the staff-level agreement with the IMF. The governor did not specify any particular issue but stated that finalising matters with ministries and divisions takes time. Pakistan and the IMF held talks from March 3 to 14, but both sides could not reach a staff-level agreement due to delays in finalising the Memorandum of Economic and Financial Policies (MEFP). After the mission returned to Washington, the Ministry of Finance held at least two virtual sessions with the IMF in the presence of other stakeholders. The IMF and Pakistan are in the process of finalising the MEFP in the areas of trade and taxes, along with fiscal and circular debt numbers. The federal authorities remain hopeful that the agreement will be reached soon. According to the IMF Board's schedule, the first programme review and the end-December 2024 performance and continued criteria must be completed by March 15. "The IMF and Pakistani authorities made significant progress toward reaching a staff-level agreement on the first review under the 37-month Extended Arrangement under the Extended Fund Facility (EFF)," said Nathan Porter, the IMF Mission Chief, after the talks last week. The smooth continuation of the programme is critical to ensuring uninterrupted rollovers of foreign debts by four bilateral creditors: Saudi Arabia, the United Arab Emirates, China, and Kuwait. The SBP governor stated that the IMF had "substantially reduced" the current account deficit projection for the current fiscal year during the recent review talks. At the time of finalising the $7 billion deal last year, the IMF had estimated the current account deficit at $3.6 billion or 0.9% of GDP for the current fiscal year. The governor neither confirmed nor denied whether the IMF has now projected the current account deficit target at around $400 million or 0.3% of GDP for this fiscal year. He said that the next fiscal year's target has not yet been finalised. During the talks, the IMF wanted to keep the current account deficit high, assuming that an increase in foreign exchange reserves would help build external sector buffers. The central bank's reserves remained flat at $11.1 billion by the end of last week, barely enough to finance a little over two months of imports. When asked, the governor said that the IMF is also revising inflation and economic growth projections. He noted that the central bank expects economic growth to remain around 3% during the current fiscal year. He highlighted the significant growth in foreign remittances and expressed hope that they would remain above $36 billion this fiscal year. PAC proceedings Headed by PTI's Junaid Akbar, the PAC discussed audit objections related to the finance ministry and expressed dissatisfaction over the nation's financial management. PAC members repeatedly pointed out poor budgeting and weak fiscal discipline by the Ministry of Finance during the fiscal year 2022-23. On an audit objection regarding the payment of Rs241 million in honoraria to finance ministry employees without any policy, Finance Secretary Imdadullah Bosal disclosed that a new honoraria policy would soon be approved by the federal cabinet. However, the policy's framework indicated that discretionary powers over honoraria distribution would continue. Bosal said that the Economic Coordination Committee (ECC) of the Cabinet had approved the honoraria policy in June 2022, but the federal cabinet had not yet granted approval. According to the proposed policy, the federal secretary can award one month's salary as a bonus to all employees and an additional salary to 25% of the total employees. Two special honoraria can also be granted. However, Bosal stated that the ECC chairman, who is also the finance minister, would have the authority to grant up to five months' salaries as "special honoraria." Committee members criticised these discretionary rewards, comparing them to the lavish gifts given by Mughal emperors. They argued that such powers should not be included in the policy. Bosal noted that 60 departments receive budgeted honoraria, not just the finance ministry.
Asharq Al-Awsat
16-03-2025
- Business
- Asharq Al-Awsat
IMF Makes Progress Toward Reaching Staff Agreement with Pakistan on First Review of $7 Bln Program
The International Monetary Fund (IMF) and Pakistani authorities made significant progress toward reaching a staff level agreement on the first review of an ongoing $7 billion program, IMF Mission Chief Nathan Porter said in a statement on Saturday. The mission and Pakistani authorities will continue policy discussions via video conference to finalize these discussions over the coming days, the statement said, according to the Pakistani newspaper, The News. 'The IMF and the Pakistani authorities made significant progress toward reaching a Staff Level Agreement (SLA) on the first review under the 37-month Extended Arrangement under the Extended Fund Facility (EFF),' Porter said in a statement on Friday. The lender's team, led by Porter, was in Pakistan from February 24 to March 14 to hold discussions on the first review of Pakistan's economic program supported by the EFF and the possibility of a new arrangement under the lender's Resilience and Sustainability Facility (RSF). The South Asian country, which has faced an economic meltdown in recent years, is treading a long path to economic recovery under the $7 billion IMF program it secured in September last year. Meanwhile, the Pakistan-Afghanistan Joint Chamber of Commerce and Industry has called for immediate action from Islamabad to resolve the trade crisis with the Taliban and Central Asian countries. The chamber's president highlighted the negative impacts of the closed Torkham border crossing and transit taxes on Pakistan's economy and regional trade. Junaid Makda, president of the Pakistan-Afghanistan Joint Chamber of Commerce and Industry, said on Friday that increasing trade barriers, rising transportation costs, and the continued closure of the Torkham border are severely harming cross-border businesses. Makda also warned of potential long-term damage to Pakistan's economy due to the ongoing situation, stating that it forces traders to use Iranian ports instead of Pakistani routes, which will harm the country's trade network. The Torkham border has been closed for more than 20 days due to border tensions between Pakistan and the Taliban. Pakistan's Ministry of Foreign Affairs has stated that the crossing will remain closed until the Taliban halt construction activities in the area.
