IMF report does not reflect ground realities of Pakistan

[Naveed Yaseen]

ASMA RAZAQ
ISLAMABAD (March 09 2009): An International Monetary Fund (IMF) report, titled, The Implications of Global Financial Crisis for Low-Income Countries, presents statistics that no longer reflect the changing ground realities because of the deepening global recession. This is manifest for the GDP growth estimates for Pakistan. The report shows a projected GDP growth rate of 2 percent in 2009.

However, during the quarterly review of the state of Pakistan economy in February 2009, a requirement for the release of the next tranche of the 7.6 billion dollars standby arrangement by the end of March, 2009, GDP growth was scaled down by IMF staff from the original 3.5 percent to 2.5 percent. This was stated by Shaukat Tarin, Advisor to Prime Minister on Finance, on his return from Dubai.

This figure remains at odds with those presented by the State Bank of Pakistan (SBP) in its detailed monetary policy statement, January-March 2009. The projected SBP growth rate was 3.7 percent, lowest in last six years.

The central bank said that poor law and order situation, besides structural weaknesses such as power shortages, etc, were responsible for slow economic growth during the current fiscal year.

"Precarious and unsustainable balance of payment position and heavy reliance of the government on borrowings from the SBP remained the major sources of macroeconomic instability in the initial months of FY09. High international commodity prices, global financial crisis, and slowing economic growth world-wide aggravated the domestic vulnerabilities " the SBP had said in its statement.

The global economy is in the midst of a deep downturn as an adverse feedback loop between the real and financial sectors is taking its toll both in advanced and in emerging and developing countries. As a result, commodity prices are unlikely to recover in the short run.

The IMF report says that the global financial crisis is expected to have a major impact on low-income countries (LICs). The crisis is projected to increase the financing needs of LICs by at least $25 billion in 2009.

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