Harald Finger,IMF Mission Chief for Pakistan, yesterday issued the following statement in response to recent media reports on the IMF Pakistan team's views regarding Pakistan's exchange rate:
"Pakistan's nominal exchange rate should continue to be market-determined. Any implied overvaluation of the real effective exchange rate (ie nominal exchange rate adjusted for differences in prices between Pakistan and its trading partners) can be corrected over the medium term with continued structural reforms, gradual improvement of Pakistan's competitiveness, and supportive monetary, fiscal, and financial sector policies.
"In the context of the Article IV consultation with Pakistan, IMF staff performed an assessment of the country's external position. As part of this assessment, a number of models were used to assess Pakistan's real effective exchange rate. These model estimates are imprecise and show significant variation, thus being only indicative. They pointed to some overvaluation and, more broadly, a need for continued strengthening of export competitiveness, public finances, and external reserve buffers.
"A detailed analysis will be presented in the forthcoming staff report for the Article IV consultation, forthcoming in December."
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