The International Monetary Fund (IMF) has urged Pakistan to bring its current account deficit under control, an official said, as Prime Minister Shehbaz Sharif’s government seeks an increase in the size and duration of the current IMF programme.
Pakistan’s current account deficit ballooned to $13.2 billion in the nine months of the current fiscal year from a gap of $275 million a year earlier on the back of soaring oil import costs, official data showed. Rating agency Moody’s expects the deficit to widen to five to six per cent of gross domestic product in the current fiscal year ending June 30, up from its earlier 4pc projection, putting greater pressure on Pakistan’s foreign reserves.
Jihad Azour, director of IMF’s Middle East and Central Asia Department, told Reuters that the fund’s team will assess the policy priorities of the new government and the economic impact in the context of the war in Ukraine. “But of course, we have been over the last few months highlighting the importance of maintaining the current account situation under control [and] reduce the current account deficit.”
He did not elaborate on the policy actions, but the IMF has earlier said that a continued commitment to a market-determined exchange rate and a prudent macroeconomic policy mix would help reduce the deficit. The new government faces enormous economic challenges, predicting the fiscal deficit will exceed 10pc of GDP at the end of the current financial year.
Finance Minister Miftah Ismail said on Monday that Pakistan sought an increase in the size and duration of its $6bn IMF programme. When asked whether Pakistan would need to take certain steps first, such as cutting oil and gas subsidies, Azour said these will be discussed during the visit in May. “We’ll discuss these issues and therefore I will not preempt those discussions,” he said.