Battling with homegrown terrorism and a strong presence of Islamic extremists, Pakistan has a good news as the International Monetary Fund on Wednesday said that three years of reforms has strengthened country's macroeconomic resilience and economic outlook and after the recent progress, it has an opportunity to set its economy on a higher growth path.
"After three years of reforms, Pakistan has strengthened its macroeconomic resilience and economic outlook, providing an opportunity to build on recent progress with structural reforms and set the economy on a higher growth path," the International Monetary Fund said in a statement here after the conclusion of its annual consultations with Pakistani officials.
The annual consultations were held in Dubai from March 28to April 5.
However, a number of challenges in the fiscal, external, gains in and energy sectors could affect the hard-won stat gains in the period ahead.
In this context, the mission called for strong efforts with respect to fiscal consolidation and the implementation of key structural reforms, and vigilance in managing the country's external position.
Expecting the growth rate of Pakistan to reach 5 per centin fiscal 2016-17, the IMF attributed this to the improved global economic conditions, rising investment related to the China-Pakistan Economic Corridor (CPEC), and recovering agriculture.
At the same time, a slower-than-expected growth of large-scale manufacturing and stagnant exports are weighing on growth prospects, it said.
"The current account deficit is expected to reach 2.9 percent of GDP in FY2016/17 owing to a higher trade balance inpart reflecting increased imports of capital goods andenergy and stagnant remittances, while average headline inflation is expected to be contained at 4.3 per cent," itsaid.
Over the medium term, growth could accelerate to about six percent on the back of stepped-up CPEC and otherinvestments, improved energy supply, and continued structuralreforms, the IMF report said.
According to the IMF, economic policies in the periodahead need to focus on preserving the hard-won stability andaddressing emerging as well as medium-term challenges, notablyin the fiscal, external, and energy sectors.
Stronger fiscal consolidation efforts will be needed tomake up for the lower-than-expected revenue in the first halfof this year and achieve a further deficit reduction nextyear, it said.
Greater exchange rate flexibility and efforts to improveexport sector productivity are needed to address the wideningtrade deficit as well as strengthen the economy's ability toabsorb medium-term CPEC-related and other capital outflows, the IMF said.
"Bringing the power distribution sector to full costrecovery will be critical to ensure long-term success of newenergy initiatives and minimise fiscal costs. Alongside, monetary policy needs to remain prudent," the report said.