Signs of economic improvement materialize in Pakistan

Pakistan’s economy is showing signs of improvement with growth rates expected to hit 3.1 percent in the 2013-2014 fiscal year, according to a statement by the International Monetary Fund on Sunday.

Pakistani workers prepare a steel pillar at a construction site in Lahore in January. Growth in the manufacturing and service sectors have spurred economic improvement in Pakistan. Credit: Arif Ali/AFP/Getty Images

The IMF’s mission chief to Pakistan Jeffrey Franks issued the statement after a week of meetings between the IMF Staff Mission and Pakistani authorities in Dubai.

The meetings served as a review for the status of the $6.7 billion loan agreement Pakistan signed with the IMF in September — just six years after the country received an IMF bailout.

“The IMF mission held constructive discussions with government and central bank officials on the economic performance under the EFF program and is encouraged by the overall progress made in pushing ahead with policies to strengthen macroeconomic stability and reviving economic growth,” Franks said in the statement.

According to Franks, large scale manufacturing and growth in the service sector are driving the GDP boost. Other factors include reforms on the country’s electricity sector and measures to finance government debt.

In order to secure the loan, Pakistan committed to increasing growth and improving financial stability, while implementing measures to reduce deficit, reduce pervasive electricity shortages and increase the country’s poor rate of tax collection.

“I think we have taken very painful measures, which were partially politically unpopular, but I think they were needed by the country and it has not only changed the direction of the economy… it has put us on the road of recovery and stability,” Pakistan’s Finance Minister Mohammad Ishaq Dar said.

While the IMF statement highlighted Pakistan’s economic improvement, the organization expects inflation rates in the country to increase from 7.9 percent to 10 percent this year.

As part of the agreement the IMF will conduct periodic reviews to approve loan installments. The loan will be awarded in installments of $550 million over three years.

The IMF will conduct its next review in March.