ISLAMABAD: The International Monetary Fund has called on Pakistan鈥檚 new government to act fast to stabilize its teetering economy, warning growth will likely slow and inflation rise, but made no mention of a new bailout deal.
Former cricketer Imran Khan鈥檚 new administration had vowed to decide by the end of September if it would seek an IMF bailout to shore up the economy as it faces a balance-of-payments crisis and dwindling reserves.
However, it has yet to announce a deal as it seeks other arenas of financing and launched a highly publicized austerity drive that has included auctioning off government-owned luxury automobiles and buffaloes.
The IMF said in a statement released late Thursday that Pakistan was in need of significant external financing in the near term and recommended upping gas and power tariffs while also pushing for exchange rate 鈥渇lexibility鈥� and monetary policy tightening.
鈥淭hese steps would help reduce current account pressures and improve debt sustainability,鈥� said the fund in a statement.
But it warned that tough days may lay ahead as higher oil prices and tightening financial conditions for emerging markets will likely add to Pakistan鈥檚 economic woes.
鈥淚n this environment, economic growth will likely slow significantly, and inflation will rise,鈥� said the IMF.
Pakistan has gone to the IMF repeatedly since the late 1980s. The last time was in 2013, when Islamabad got a $6.6 billion loan to tackle a similar crisis.
For months analysts have warned Khan鈥檚 new government must act quickly to stem a new current account crisis, which could undermine its currency and its ability to repay billions in debts or purchase imports.
The US, one of the IMF鈥檚 biggest donors, has raised fears Pakistan could use any bailout money to repay mounting loans from China, sparking criticism from Islamabad.
Pakistan鈥檚 budget deficit has climbed steadily over the past five years, and foreign currency reserves have declined. The rupee has been repeatedly devalued in the past year, fueling inflation.
Khan has vowed to improve trade with India, increase the ease of doing business and boost tax collection but since taking office in August is yet to roll out a comprehensive plan aimed at tackling the country鈥檚 economic fortunes.
The state of Pakistan鈥檚 finances could also undermine one of Khan鈥檚 most popular promises to construct an 鈥淚slamic welfare state鈥� based on increased spending on education and health.
The IMF鈥檚 warnings come days after the Asian Development Bank said Pakistan鈥檚 economy could shrink by one percent in the current fiscal year.