IMF presses Pakistan to reduce GDP target to 4.5%


In a shocking development, International Monetary Fund has put spanner on the government of the day and linked its endorsement on home-made economic stabilization program with certain conditions including the downwards revision of GDP growth to 4.5 percent from its projected target of 5.5 percent, a senior official told Pakistan Observer.

The Fund also asked economic managers at Islamabad to increase the inflation target to 20 percent from the target of 11 percent fixed by the incumbent regime for ongoing fiscal 2008-09.Pakistan and the visiting technical mission of the IMF concluded its talks on Tuesday. During the talks, the Fund mission headed by Juan Carlos Di Tata handed over Ad Memorandum to Islamabad’s authorities on which they would submit their comments within this ongoing month.

However, the sources in the Finance Ministry said that the fiscal deficit would remain in the range of Rs582 billion in nominal terms for the current fiscal year. When he was asked if the fiscal deficit would remain in the range of 4.7 per cent of the real GDP terms, he said that it would certainly come down from 4.7 per cent of the GDP to around 4.3 per cent for the current fiscal as the fund is asking to further tighten the belt by reducing expenditures and mobilising revenue generations.The IMF also insists upon authorities to jack up tax revenue target from Rs1.250 trillion keeping in view higher inflation and depreciation of rupee by 24 per cent against dollar as revenue mobilisation will help Pakistan to curb its yawning budget deficit beyond its limits.“Instead of getting easy solution to bailout its beleaguered economy, Pakistan should focus upon long terms solution such as attracting private sector investment to restore higher growth trajectory,” the sources quoted IMF high-ups as saying during their meeting with Pakistani authorities.The nominal growth, the sources said, is likely to remain on higher side mainly because of unprecedented inflationary pressures, which never witnessed history of this country. But the real GDP growth will remain on much lower side compared to the initial estimates made by the government of Pakistan, the IMF assessment showed.On inflationary target, the IMF assessment shows that it will remain in the range of 20 per cent against earlier envisaged target of 11 per cent for the current fiscal year. Another Finance Ministry official, when contacted, said that the IMF mission would give advice within this ongoing month but it would not be binding on Pakistan because Islamabad was no more in the Fund program.