Pakistan's economy vulnerable: IMF

Washington, Feb 7 (ANI): The International Monetary Fund (IMF) has warned that Pakistan's economy is at a vulnerable stage.

Insisting that Pakistan's economy is in a bad state as far as both internal and external shocks are concerned, the IMF urged the country to widen its fiscal deficit, The Nation reports.

The IMF said Pakistan's economy would speed up to a 3.4 percent growth pace in fiscal 2011-2012, which runs to June 30, compared to 2.4 percent last year. However, that was less than half the pace needed to absorb two million new workers in the market every year, it said, while unemployment and underemployment remain higher than the official 6.6 percent rate.

At the same time, loose money policies by the State Bank of Pakistan, meant to help the economy grow, continue to feed double-digit inflation.

The economy is 'highly vulnerable with few buffers to absorb shocks', the Fund said in an annual report.

It noted that political resistance has prevented a needed effort by the government to increase revenues to cover its budget shortfall, with the result that the deficit will expand to about 7.0 percent of gross domestic product this year from 6.6 percent last year.

It also said that Pakistan's foreign balance is weakening, with exports expected to fall in US dollar value by 1.8 percent, partly due to falling cotton prices, adding that the central bank's intervention to support the rupee had led to a two billion dollars fall in reserves in the past six months.

The IMF warned of 'considerable downside risks to this already difficult baseline', citing both the challenging global economic environment and, inside Pakistan, coming Senate and parliamentary elections. (ANI)