IMF says it has nothing to do with rupee depreciation

ISLAMABAD: The International Monetary Fund (IMF) mission to Pakistan has welcomed the State Bank's recent move to allow the currency exchange rate to adjust to market conditions, but has further called for a "continued exchange rate of flexibility in the period ahead".

In a press briefing here today, the IMF mission led by director Harald Finger said the exchange rate adjustment would help support Pakistan's exports and economic growth.

An IMF delegation is visiting Pakistan for meetings with Pakistani officials as part of its post program monitoring. The mission concluded its first round of discussions on the country’s economy last week and was expected to conclude its policy-level talks by the end of this week.

On Wednesday, the Pakistani Rupee inched up to close at 110.52 against the US dollar — a level analysts and currency traders see as stable after a depreciation they say is in line with the IMF's demands.

But the IMF mission said today that it had nothing to do with the adjustment in the Pakistani currency, and that the State Bank of Pakistan had made its own decision for adjustment.

In its press briefing today, IMF director Harald Finger said the Pakistani economy was expected to grow by 5.6 percent this year, falling short of a 6% GDP growth target. He added that tight monetary stance was require to keep fiscal discipline in order to reverse widening external imbalances.

"Strong reform effort is needed to maintain external stability and ensure debt sustainability. The government should pursue broadening of the tax base and strengthening of the monetary policy framework," said the IMF director.

He said that Pakistan has not requested the fund for any loan in 2018.

"After seeing the current reserves position, Pakistan does not need any IMF program," he said.

"The government biggest challenge is political uncertainty. Second biggest challenge for Pakistan has been maintaining foreign exchange reserves. To contain fiscal deficit has been the third biggest challenge for Pakistan," he said.

He added that sustain economic reforms as the upcoming elections draw neared would be another major challenge.

The IMF director said Pakistan's economic growth has been accelerating, with subdued inflation and reserves despite higher external financing.

"Inter-company arrears in the power sector continue to accumulate and need to be addressed decisively," he added.