IMF scales down GDP target to 3 percent from 3.5 percent

[LahoreEstate]

ISLAMABAD (August 09 2009): The International Monetary Fund (IMF) has projected GDP target of 3 percent, against 3.3 percent set by government of Pakistan, for the current financial year 2009-10, due to economic slowdown buffeted by a volatile political and security situation. The Executive Board of IMF in its meeting lowered the GDP target while reviewing the economic situation of Pakistan.

The government, in its Annual Plan for fiscal year 2009-10, had set the country's (GDP) growth target at 3.3 percent. The government had estimated that the current fiscal year's GDP growth target was expected to be achieved through a growth of 3.8 percent in agriculture sector, 3.9 percent in the services sector, and 1.8 percent in the manufacturing sector.

IMF has said that, buffeted by a volatile political and security situation, Pakistan's growth has been anaemic, and the near-term outlook for economic activity, especially manufacturing, remains weak. The IMF noted that a rebound in agriculture on the back of a bumper wheat crop helped maintain growth in positive territory.

However, with increasing weakness in large-scale manufacturing, exports, and private sector credit, the estimate of real GDP growth for 2008-09 had been lowered from 2.5 to 2.0 percent, and is projected by the IMF at 3 percent for 2009-10. Moreover, the Federal Bureau of Statistics recently revised down real GDP growth for 2007-08 from 5.8 to 4.1 percent, indicating that the economic slowdown had begun before 2008-09.

IMF has observed that inflation has continued to decline, but it remains high with core inflation at just below 16 percent in June. Despite the political and security problems and some policy slippages, the government managed to stabilise the economy--the exchange rate has been broadly stable in recent months, and the international reserves position strengthened to $8.3 billion in July, compared to $3.5 billion at end-October 2008.

Like many other emerging markets, Pakistan has been hit by the global economic and financial crisis. "But, despite the challenges brought on by the global downturn and an extraordinarily difficult security situation, the government has managed to stabilise the economy," said Adnan Mazarei, head of IMF mission to Pakistan.

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