Inflation likely to rebound: IMF

The International Monetary Fund (IMF) on Saturday warned that inflation is likely to rebound in coming months in Pakistan. Jeffrey Franks, IMF's Mission Chief for Pakistan, told a press conference that inflation has been somewhat better than anticipated, around 8 percent currently, although some rebound in the inflation rate in the coming months is anticipated.
Franks urged the government to make some additional progress in trying to eliminate barriers to investment and improve business climate to attract greater investment and foster robust economic growth and development. Replying to a question, Franks said as part of trade regime reforms, in the previous Letters of Intent, the Pakistani authorities said they would seek normalisation of trade relations with India. Specific results of the economic gains to Pakistan and India from normalisation of trade relations vary from studies conducted on the impact on Pakistan economy if it gives India the status of most-favoured nation; however, the gains are substantial for both.
He said normalisation of trade relations does not mean just the granting of the MFN status. It is a question of opening up border crossings and eliminating non-tariff barriers. It is a comprehensive approach that the two countries would have to undertake to lower barriers to trade-both tariff and non-tariff barriers. "We had six months ago said that Pakistan would work towards normalising trade relations with India. However, I do not think there has been any development since then over these last few months," he added. He said worsening of the security situation in Pakistan is potentially a relatively important risk factor going forward. Regardless of the security conditions, pursuing good economic policies will bring dividends in terms of better economic reforms.
Franks said the overall economic situation in Pakistan is gradually improving. The forecast for economic growth for this fiscal year of 2013-14 has been revised from 2.8 percent to 3.1 percent. The IMF inflows helping to boost reserves, balance of payment flows are beginning to turn more positive for the country, besides influx of money from Gulf States, which is also helping. In the coming months this trend of recovering Central Bank reserves is expected to continue with important inflows coming from other international partners, particularly the World Bank, the Asian Development Bank, and some bilateral donors to Pakistan.
He further said that by end of 2013-14, Pakistan will likely meet the deficit target for the year as a whole, bringing the deficit down in the range of 5.5 percent of GDP from around 8 percent of GDP last year. The government is making good progress in reforms in the energy sector, and working hard to push forward the privatisation agenda, although there do seem to be some delays in some of the key milestones along the stage to bring certain firms to the market for secondary public offerings, or initial public offerings.