Pakistan should contain budget deficit: IMF

RECORDER REPORT

ISLAMABAD: The Inter-national Monetary Fund (IMF) has said that Pakistan needs to contain the budget deficit, implement a cautious monetary policy, and support a responsive exchange rate to get back on the path of growth and sustainability.

Gerry Rice, Director of the External Relations Department of IMF, said at a press briefing that 2011-12 outlook for the economy of Pakistan was challenging.

A statement issued by the IMF dated November 22, 2011 after discussions with Pakistan on the economic outlook of the country under Article IV said: "The outlook for 2011/12 is challenging. Although real GDP growth is projected at about 31/2 percent and inflation is projected to decline, the external current account balance is projected to return to a deficit and global risk aversion and security concerns may limit capital inflows".

Pakistan entered a Stand-By Arrangement program under IMF in November 2008 but due to non-implementation of macroeconomic reforms as per commitment to the Fund, the country failed in completing the Stand-By Arrangement (SBA) program.

During the current calendar year 2012, the repayments scheduled to the Fund by Pakistan would be $ 413 million on February 24; $ 413 million on May 25; and $ 113 million on June 29. These repayments would further strain the considerable increase in the current account deficit in the first five months of the current fiscal year, the heavy reliance on the banking system by the government, and the likelihood of a sharper fall in foreign exchange reserves on account of large repayments of external debt.