Monday, November 22, 2010

IMF Scales Up Pakistan Inflation Projection To 14% This Fiscal Year

IMF Scales Up Pakistan Inflation Projection To 14% This Fiscal Year

KARACHI -(Dow Jones)- The International Monetary Fund has raised its inflation projection for Pakistan to 14% in the current fiscal year from 13.5% as heavy flooding overwhelmed large parts of the South Asian country, severely damaging crops and infrastructure.

However, the IMF kept its economic growth projection for Pakistan unchanged at 2.8%, it said in a report. The organization already lowered the forecast to 2.8% from 4% prior to the floods.
Pakistan's fiscal year runs from July 1 through June.

The country has been severely hit by the worst floods in its history, which submerged about a fifth of the country, killed more than 1,500 people and displaced about 2.0 million. Roads, bridges, power lines and irrigational facilities have been badly damaged, choking supplies and numbing the economy.

"The floods will dampen economic growth significantly in 2010-11 and add to pressures on the balance of payments and public finances," the IMF said in the report.

Late October, the State Bank Of Pakistan, the country's central bank, said average inflation is likely to accelerate to 13.5%-14.5% during the year, following the unprecedented floods.
Inflation was at 11.7% in the last fiscal year and was previously expected to ease to 9.5% this year.

The IMF also said the wider trade deficit will partly be offset by an increase in remittances in the wake of the floods. The current account deficit will likely widen to 2.8% of Gross Domestic Product, it added.
Pakistan's central bank in October projected that the economy would expand 2%- 3% in the current year, significantly lower than the government's projection of 4.5%.

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