Pakistan was praised yesterday by IMF chief Christine Lagarde for emerging from an economic crisis and stabilising its economy, after the country completed its bailout programme.
The IMF released the last instalment of a $6.6bn three-year economic bailout package to Pakistan last month.
Lagarde, on her first visit to Pakistan yesterday, congratulated Prime Minister Nawaz Sharif “on successfully completing the IMF programme which has helped Pakistan restore its macroeconomic stability”, according to a statement from Sharif’s office.
“It is a fantastic step in your journey that you have achieved a better and solid economic position in a brief period of two years,” Lagarde said, according to the statement.
Lagarde added the completion of IMF programme reflected “very positively” on Pakistan and the country is “certainly out of economic crisis”.
Lagarde noted that economic growth has gradually increased, the fiscal deficit has reduced while inflation has continuously declined in Pakistan.
“She also appreciated the country’s strengthened social safety nets and tax policy and administration reforms,” the statement said.
In an article published in Pakistan’s daily The News, Lagarde wrote that the country had embarked on an important transformation to join the ranks of emerging market economies.
“Its three-year economic reform programme, which the IMF supported, has delivered significant gains,” she wrote.
“The economy is now more resilient, and further steps have been set in motion to support higher, private sector-led, and inclusive growth.”
Pakistan’s economy has recovered over the last three years as is underscored by the improvements in the fundamental indicators and the International Monetary Fund’s parting note released earlier this month. 
Chances of a crisis revisiting the economy any time soon appear minimal.
The economy is expanding – though at a much slower pace than is required to create enough jobs for over 2mn people entering the market every year and seems to have developed sufficient strength to even absorb the ‘shock’ of a potential surge in global oil prices in the near future.
The foreign exchange reserves have peaked to above $24bn, multilateral lenders are ready to dole out more money and international investors willing to buy government bonds – at least for the time being.
“The economy continues to recover and we are out of the danger zone. Though our economy is less vulnerable today, the recovery is fragile and serious challenges to its long-term durability remain. A lot the tougher part related to long-standing structural issues impeding investment and growth is yet to be done as Pakistan still remains one of the least competitive economies internationally; at the bottom of the global development ranking,” Lahore Chamber of Commerce and Industry president Abdul Basit warns.
He points out that tax collection has increased, but little has been done to directly tax the untaxed and under-taxed segments in order to net new taxpayers and reduce taxes on existing businesses.
“Similarly, nothing concrete is being done to control electricity distribution losses and theft, and the entire burden has been shifted to the consumers in the shape of higher power tariffs. Nor has anything been done to plug the leakages in the public sector.”
Basit argues that Pakistan’s economic recovery is primarily founded on low global oil prices and international debt accumulated over the last three years, rather than on an increase in exports, investment and tax-to-GDP ratio.
“The need of the hour is to tackle the long-standing structural issues impeding investment in the industry, and growth in exports, by reducing the cost of doing business and lowering taxes,” he explains.
Private investment has picked up in certain sectors like cement, as these industries see an opportunity for themselves with energy and transport projects under the China Pakistan Economic Corridor picking momentum.
But, as pointed out by the IMF, in its report on the conclusion of the three-year $6.2bn loan facility, private investment remains too low to support growth (despite improvements in energy supplies to the industry).
Bankers too don’t see a lot of investment in the near future unless the government takes measures to improve the business climate.
“Business persons are coming to us to explore opportunities but there is still a lot of cynicism despite low credit costs. I don’t see much investment outside CPEC-related projects in the next couple of years,” a Karachi-based banker insists.