Pakistan May Miss Growth Target, Inflation May Be 22%, SBP Says

By Farhan Sharif

Dec. 6 (Bloomberg) -- Pakistan’s central bank said the nation’s economy may miss growth targets and inflation may rise as high as 22 percent.

The State Bank of Pakistan, in an annual report today, said the economic growth rate during fiscal year the fiscal year that is about to end is expected to be around 3.5 percent to 4.5 percent compared with a target of 5.8 percent.

Pakistan’s economy may expand as little as 3 percent this fiscal year in response to a “tightening” of economic policies and slowing growth among the nation’s trading partners, the International Monetary Fund said in a statement this week. That would be the slowest pace since 2000, when South Asia’s second- largest economy grew 2 percent.

In order to secure an IMF loan, Pakistan’s government and central bank have agreed to eliminate electricity subsidies by the end of June 2009 and to continue to adjust fuel prices to reflect international prices. That should reduce the budget deficit as a proportion of gross domestic product to 3.3 percent by 2009-10 from 4.2 percent in 2008-09 and 7.4 percent this year, the IMF said.

Pakistan was forced to turn to the IMF for a bailout after its foreign reserves shrunk 75 percent in a year to $3.45 billion.

To contact the reporters on this story: Farhan Sharif in Karachi, Pakistan, at fsharif2@bloomberg.net.