ISLAMABAD - The IMF expects robust economic growth in Pakistan but called on Monday for tighter monetary policy to control inflation, currently running at its highest annual rate since 1997. Pakistan's gross domestic product is expected to grow by 7.0-7.5 percent in the financial year ending in June, but the country needed to increase the rate of growth while reducing poverty and tackling inflation, IMF regional director, Mohsin S. Khan, said.
| Seven percent? Are they using Monopoly money? |
"Rapid import and credit growth and rising core inflation indicate that the economy continues to heat up," Khan said at the beginning of a two-day annual conference of Pakistan's international donors and lenders. "There is a growing risk that expectations of higher inflation become entrenched," he said.
If that happened, Pakistan would need a harsher tightening of monetary policy, he said. "Higher price and wage pressures, combined with limited exchange rate flexibility, as witnessed since the beginning of the year, could eventually hurt Pakistan's competitiveness," he said.
| As if the Bugtis have any notion of 'exchange rate flexibility'. |
Pakistan's consumer price index rose 10.25 percent in the 12 months through March, its highest inflation rate since 1997. With a 12.7 percent increase in money supply in the first three quarters of the financial year, most industries operating at full capacity, and a large monetary overhang from the last three years, the Asian Development Bank last week projected full-year inflation for the fiscal year would exceed 7.5 percent.
Khan said Pakistan had convincingly recovered from the financial crisis of the late 1990's—when foreign exchange reserves shrank to the equivalent of a few weeks imports—and was on a higher growth rate. But poverty remained a problem. About 30 percent of Pakistan's 155 million people live below the poverty line, official estimates show.
| And about 97% of them live in conditions that you and I would never tolerate. The rest are holy men and Army officers ... |
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