IMF sounds alarm bells as Pakistan's economy slides to danger levels

IMF has stressed the need for Pakistan to bolster its revenue-earning policies to reduce possibly widening fiscal deficit.

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The International Monetary Fund on Wednesday expressed serious concerns over the direction in which Pakistan's economy is heading and urged for a quick and effective look at the country's near-team policies to regain fiscal discipline.

As part of its assessment, the IMF highlighted that Pakistan's fiscal deficit was all-set to reach 5.5 per cent of the country's GDP - considerably higher than Islamabad's previous prediction of 4.1 per cent. For the uninitiated, fiscal deficit occurs when a government's expenditure is greater than the government's revenue. And this gap is what IMF fears will widen in Pakistan at a time when rival India has projected a fiscal deficit of 3.3 per cent of its GDP for 2018-19 financial year.

The IMF board has also reportedly projected the economic growth rate to stand at 5.6 per cent instead of 6 per cent targeted by Islamabad.

In a statement, IMF further noted that mounting fiscal financing needs and falling reserves is a clear and present threat to Pakistan's medium-term capacity to repay the money it has borrowed. "Directors also emphasised the need for prudent debt management and caution in phasing in new external liabilities, and the urgency of tackling rising fiscal risks stemming from continued losses in public sector enterprises," the statement read.

All, though, is not dark and dingy for the economy though. IMF has also noted that inflation has remained constant and has commended the country for allowing certain exchange rate adjustment. The challenge ahead though would be shielding pro-people spendings even as Pakistan attempts to control overall expenditure and bolsters revenue-earning measures.