Pakistan will be moving towards greater economic self-confidence when the $1.52 billion poverty reduction and growth facility (PRGF) comes to an end in December this year. The International Monetary Fund(IMF) has recently concluded the ninth and final review of this facility after which the country will exit from these exceptional financing arrangements with the IMF. Lately, Pakistan has been managing its debts in a way that it seeks either grants or loans on concessional terms. It has gone to the bond market where its improved economic performance has brought good results. The effort to avoid, as far as possible, assistance based on conditionalities has been there for a long time but the results have started showing now due to the prudent economic policies and their management over the last few years. The very fact that the country does not expect to go to IMF for its assistance proves that its economy has got the kind of resilience that can sustain it on its own.

On this occasion, it is encouraging to find out that the IMF has praised the country’s economic progress. It has said that Pakistan’s economic performance and prospects are now more favourable than at any time in the past decade. However, it has found the rising trend of inflation a matter of concern. But the State Bank has tightened its monetary policy to counter this trend. The upsurge in food inflation driven by supply shocks has underscored the need to improve the supply chain of agricultural products. It may not be out of place to mention that higher oil prices have increased the oil import bill. Since the government had decided not to increase the prices of POL products in the domestic market during the past few months, it absorbed the increase in order to provide the much-needed relief to the people. Besides controlling inflation, the government should now ensure sustained high economic growth on an annual basis and accelerate the momentum of exports. Loans should be used for most productive purposes so that it creates the capacity in the economy for servicing them.

The IMF has maintained that the restoration of fiscal discipline, a cautious monetary policy, trade liberalisation, privatisation and other structural reforms in the financial and tax areas aimed at improving efficiency and the business environment have created a sound basis for a lasting economic recovery in Pakistan. The Fund is of the view that the investment climate should be further improved and privatisation process be continued. The IMF has, however, pointed out that infrastructure, especially in the water sector, needs greaterattention, especially in view of the current water shortages in the country. As a lending institution, the IMF will surely have a view about the country’s economic performance but its acknowledgment that the basis for sound economic recovery has been laid should inspire greater confidence in the economic policies of the government. As the economy has moved from macro-economic stability to higher level of economic growth, the government’s attention must remain focussed in addressing the problems of inflation, unemployment and poverty.