ISLAMABAD: The International Monetary Fund (IMF) has termed the authorities' plan to achieve a small primary surplus, 0.2 percent of the GDP in the fiscal year 2023, as a welcome step to reduce fiscal and external pressures and build confidence.

The Fund report – combined seventh and eighth reviews under the Extended Arrangement under the Extended Fund Facility (EFF) stated that containing current spending and mobilizing tax revenues are critical to create space for much-needed social protection and strengthen public debt sustainability.

Efforts to strengthen the viability of the energy sector and reduce unsustainable losses, including by adhering to the scheduled increases in fuel levies and energy tariffs, are also essential.

Further efforts to reduce poverty and protect the most vulnerable by enhancing targeted transfers are important, especially in the current high inflation environment, he added.

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“The tightening of monetary conditions through higher policy rates was a necessary step to contain inflation. Going forward, continued tight monetary policy would help to reduce inflation and help address external imbalances. Maintaining proactive and data-driven monetary policy would support these objectives.

At the same time, close oversight of the banking system and decisive action to address under capitalised financial institutions would help to support financial stability. Preserving a market-determined exchange rate remains crucial to absorb external shocks, maintain competitiveness, and rebuild international reserves.

The Fund projected 4.6 percent budget deficit for the current fiscal year.”

Copyright Business Recorder, 2022