The International Monetary Fund has projected 3.2 percent GDP growth of Pakistan for the current fiscal year, lower by one percent than 4.2 percent target set by the government, it is learnt. Sources told Business Recorder the IMF delegation was of the opinion that growth has been deteriorating slowly because of energy situation and dismally low investment, hence the target of 4.2 percent is simply unachievable.
The IMF delegation held two days policy level talks with the economic team led by Finance Minister Dr Abdul Hafeez Sheikh on Post Programme Monitoring (PPM) of the Stand-By-Arrangement which concluded on Tuesday. Sources said the IMF team was of the view that low investment and energy crisis coupled with issue of availability of credit to the private sector were not supportive to the growth target set by the economic team. The lack of reforms in energy sector is going to impact the growth scenario anticipated by the country. Additionally, according to the IMF team ongoing spending spree by all tiers of the government could be another factor that may affect growth.
An official who was also present in the meeting said the Fund''s concern was that heavy reliance on the borrowing could deprive private sector of the credit critical for growth. The economic team''s contention was that monetary policy has offered a considerable reduction in discount rate to facilitate the credit to the private sector for contributing to growth.
The IMF appeared unsatisfied on the economic team''s efforts to tackle the ongoing power outages through subsidies in the budget and was keen to know whether there was any plan to address efficiency issues in distribution, transmission and administration in the power sector. IMF Country Director Jeffery Franks was quoted as saying: "We also have structural plan for your energy sector as availability of energy was key to growth." The Finance Minister has reportedly informed the IMF that the government is trying to raise the gas prices.