IMF Concerned About High Inflation
Friday, May 15, 2009
The International Monetary Fund (IMF) has expressed its shock and concern over no respite in the inflation in Pakistan.Inflation increased by 1.4 per cent in April, just as much in March and one per cent in February percent owing to which the target of single digit inflation which was expected in June is also not likely to be achieved by July.
“Owing to this very reason, IMF has asked Pakistani authorities not to reduce the discount rate in the next monetary policy statement secluded to be announced in July next year,” the official said.
In the Dubai meeting, the IMF officials were curious to know as to why the inflation in the rest of world is on decline, but in case of Pakistan there exists no visible respite on this account.
“On face of it, the credit supply to private sector is at the lowest ebb which is why the economic activities in the country in negative zone,” the official said.
During the February review by the Ministry of Finance, the government expected to bring down the inflation to less then 10 percent in the month of June, but now under the new scenario, the inflation will hardly ease to 13.5 percent.
In fact IMF knowing very well that wheat price is also inflationary but Fund people did not say anything to government when it increased support price of wheat by 60 percent.
The official said that the rise in inflation is basically due to food and fuel inflation as government has increased the wheat, rice prices and did not reduce the POL prices.
Because of this very factor food inflation is on the rise. The bad governance has also 90 percent contributions to the existing inflation and 10 percent responsibility lies with private sector. If the government comes up with some effective administrative measures the inflation can be brought down, the official said.
The official referred to the palm oil prices, which were reduced to $ 400 per ton from $ 1200 per ton, but the prices of edible oil and ghee tumbled in Pakistan only Rs 12 per kg while it should have reduced by Rs 42 per kg. Now the international price of palm oil has slightly increased the prices of edible oil and ghee increased by Rs 2-3 per kg.
The IMF also asked Pakistan to build in the budget for 2009-10, some of the amount from Tokyo pledges amounting to $5.28 billion and in case of any shortfall or delay from of the said amount out of pledges, then Fund will provide the loan against the said shortfall. And in case Pakistan gets the required amount from Tokyo pledges after some delay, then Pakistan will pay back the same loan to Fund with minor interest rate.
The said additional facility is to be of a kind of cushion money that will be strictly conditional to shortfall of Tokyo money.
To a question, he disclosed that Pakistan was reluctant to build in some of the amount out of pledges in budget saying the Tokyo pledges’ materialization in stipulated time is uncertain.
The IMF also advised the economic managers to use the fiscal space of about Rs160 billion to Rs180 billion, that has been created by relaxing in the fiscal deficit target by 1.2 percent to 4.6 percent from 3.4 percent, for social sector development expenditures.
This time the Fund was not in favour of any cut in development budget, rather stressed for slash in current expenditures to achieve the target of 4.6 percent budget deficit target foxed for next fiscal year.
“Owing to this very reason, IMF has asked Pakistani authorities not to reduce the discount rate in the next monetary policy statement secluded to be announced in July next year,” the official said.
In the Dubai meeting, the IMF officials were curious to know as to why the inflation in the rest of world is on decline, but in case of Pakistan there exists no visible respite on this account.
“On face of it, the credit supply to private sector is at the lowest ebb which is why the economic activities in the country in negative zone,” the official said.
During the February review by the Ministry of Finance, the government expected to bring down the inflation to less then 10 percent in the month of June, but now under the new scenario, the inflation will hardly ease to 13.5 percent.
In fact IMF knowing very well that wheat price is also inflationary but Fund people did not say anything to government when it increased support price of wheat by 60 percent.
The official said that the rise in inflation is basically due to food and fuel inflation as government has increased the wheat, rice prices and did not reduce the POL prices.
Because of this very factor food inflation is on the rise. The bad governance has also 90 percent contributions to the existing inflation and 10 percent responsibility lies with private sector. If the government comes up with some effective administrative measures the inflation can be brought down, the official said.
The official referred to the palm oil prices, which were reduced to $ 400 per ton from $ 1200 per ton, but the prices of edible oil and ghee tumbled in Pakistan only Rs 12 per kg while it should have reduced by Rs 42 per kg. Now the international price of palm oil has slightly increased the prices of edible oil and ghee increased by Rs 2-3 per kg.
The IMF also asked Pakistan to build in the budget for 2009-10, some of the amount from Tokyo pledges amounting to $5.28 billion and in case of any shortfall or delay from of the said amount out of pledges, then Fund will provide the loan against the said shortfall. And in case Pakistan gets the required amount from Tokyo pledges after some delay, then Pakistan will pay back the same loan to Fund with minor interest rate.
The said additional facility is to be of a kind of cushion money that will be strictly conditional to shortfall of Tokyo money.
To a question, he disclosed that Pakistan was reluctant to build in some of the amount out of pledges in budget saying the Tokyo pledges’ materialization in stipulated time is uncertain.
The IMF also advised the economic managers to use the fiscal space of about Rs160 billion to Rs180 billion, that has been created by relaxing in the fiscal deficit target by 1.2 percent to 4.6 percent from 3.4 percent, for social sector development expenditures.
This time the Fund was not in favour of any cut in development budget, rather stressed for slash in current expenditures to achieve the target of 4.6 percent budget deficit target foxed for next fiscal year.
Labels: Economy, Pakistan Economy
posted @ 11:06 AM,
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