Pakistan

Macroeconomic resilience was strengthened during the three-year Extended Fund Facility (EFF)-supported program completed in September 2016: growth increased, the fiscal deficit was reduced, and foreign currency reserves recovered. Structural reforms were also set in motion: long-standing fiscal and energy sector constraints started to be tackled, and social safety nets were strengthened. Following completion of the program, there has been progress in implementing staff’s policy recommendations, although policy implementation has weakened and macroeconomic vulnerabilities have begun to re-emerge: fiscal consolidation slowed, the current account deficit widened, and foreign exchange reserves declined. On the structural front, the accumulation of arrears in the power sector has resumed, financial losses of ailing public sector enterprises continue to weigh on scarce fiscal resources, and exports remain low. Despite progress, poverty and inequality are still significant, and growth needs to become more inclusive.