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Pakistan has informed the International Monetary Fund (IMF) of its failure to keep inflation within the budgetary target of 9.5 percent and conceded that it would be 11 percent at the end of the current fiscal. The government, in the letter of intent (LoI), said that projection for inflation through end of the year was 11 percent (year-on-year).
The government said that the State Bank of Pakistan's primary monetary policy objective was to reduce inflation while continuing to strengthen the international reserve position. The government asserted that the decision to adjust the SBP policy rate would take into account the recent improvement in inflation while the remaining cognisant of supply-side price shocks and fiscal uncertainties.
The CPI inflation has already crossed double digits during July-November 2009 with 10.26 percent and will further escalate in the days ahead. As per its commitment with the IMF under the Standby Programme, the government increased power and gas tariff from January 1, 2010, while another raise is scheduled in April 2010. Analysts say that the inflation is likely to be above the target set by the government at the end of the current fiscal.

Copyright Business Recorder, 2010

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