IMF revises Pakistan’s expected inflation to 11pct

KARACHI: Pakistan’s expected rate of inflation for the 2009/10 fiscal year has been revised upwards to 11 per cent from an earlier projection of 9 per cent on higher energy costs, the International Monetary Fund (IMF) said on Friday.

Pakistan agreed in November 2008 to an IMF emergency loan package of $7.6 billion to avert a balance of payments crisis and shore up reserves. The fund increased the loan to $11.3 billion in July and released a fourth tranche of $1.2 billion last month.

“The inflation outlook (y-o-y) has been revised from 9 to 11 per cent,” the IMF said in its latest review, posted on its website (

“This reflects the rebound in the prices of fuel and a larger second round impact of the increases in electricity tariffs.”

Inflation had declined from a record high of 25.3 in August 2008, to a 22-month low in October last year of 8.87 per cent.

However inflation in November was 10.51 per cent.

December consumer prices were seen rising 11.80 per cent from a year earlier, according to a survey of 11 analysts and economists. They expected inflation to rise further in January.

The Federal Bureau of Statistics is due to release CPI data on, or soon after, Saturday.

Given the inflation trend, the IMF said it did not expect any easing of monetary policy.

“Remaining inflation pressures and increased domestic liquidity financing of the public sector prevent the central bank from easing monetary policy to support growth,” it said.

The central bank cut its policy rate by 50 basis points in November to 12.5 per cent. The IMF said it would have given “greater weight to inflation risks and preferred a more cautious stance”.

It urged the central bank to focus primarily on counteracting inflation pressures and to strengthen its foreign reserves position.

The State Bank of Pakistan is due to announce monetary policy for February and March by the end of this month and analysts expect the key policy rate to remain unchanged.

The IMF said Pakistan’s economic growth for this fiscal year, ending on June 30, would remain at 3 per cent. However, downside risks were high, it said.

Underlying vulnerabilities to the economy were high and had increased in some areas including revenue shortfalls, weak credit performance, energy subsidies and dependence on commodity imports, it said.


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