ISLAMABAD: The Asian Development Bank (ADB) has forecast Pakistan economy to grow 5.2 per cent in 2016-17 assuming further improvement in energy supply and security, and likely recovery in overall agriculture production including cotton crop.

In its ‘Asian Development Outlook 2016 Update’, released on Tuesday, the bank says nevertheless key challenges remain regarding governance and security issues, reviving agriculture and improving its productivity, increasing exports and attracting investment, strengthening public enterprises, and improving the business and regulatory environment.

The report cautioned that risks to the economic outlook in the short-term are unexpectedly high oil prices or a marked slowing of remittances. Further down the road, the end of IMF programme could relax focus on monetary and fiscal discipline, especially with the parliamentary election scheduled for 2018, and distract attention from the structural reform agenda that is essential to maintaining sustainable and equitable growth.

The report says the government has significantly strengthened macroeconomic fundamentals and advanced a comprehensive programme of structural reforms under the three-year programme with the IMF.

Inflation has been squashed to single-digit, foreign reserves built and budget deficit markedly reduced. Tax reform was launched to improve revenue performance, and substantial progress achieved towards restructuring the power sector.

According to the ADB report, a major impetus to growth in FY17 and beyond will be the implementation of $46 billion programme of infrastructure spending on roads, railways, pipelines, and electric power in the economic corridor project linking Pakistan with China.

Fast tracking will enable several energy projects to come on stream in FY18. The planned reduction in the FY17 budget deficit will further enhance funding for private sector credit and better enable it to meet rising domestic demand, and as such and assuming further improvement in energy and security, it says.

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