Reuters reported that Pakistan’s gross domestic product growth is expected to remain unchanged at 2% in the 2009 to 2010 fiscal year.

The International Monetary Fund said that the government’s GDP growth target for this July to June fiscal year is 3.3%. GDP growth is expected to rise to 3% in the 2010 to 2011 fiscal year.

IMF said that Pakistani growth was 5.6% in the 2007 and 2008 fiscal year but it slowed to 2% the following year because of macroeconomic imbalances, deteriorating law and order and an uncertain political scene. In Pakistan, the economic slowdown began before the global crisis.

The IMF projected inflation this fiscal year to be 13.9% compared with 20.3% in 2008. The government has an inflation target of 9.5%. The IMF has projected inflation to ease to 9.4% in the 2010 and 2011 fiscal year.

According to official data, average inflation from July to September rose 10.66% from a year earlier compared with 24.52% in the same period of 2008. Inflation for September was up 10.12% from a year earlier compared with August’s inflation which rose 10.69% YoY.

The central bank, which pursued a tight monetary policy in the 2008 calendar year by raising the key policy rate by 500 basis points to control inflation, eased it 2009 cutting the policy rate by a 100 basis points in April, then again in August.

The IMF said that “Looking forward, further rate cuts will need to be contemplated carefully, given exchange rate arrangements, reserve positions and still high rates of inflation and rising commodity prices in world markets.”

The IMF and the government have projected the fiscal deficit to narrow to 4.9% of GDP this fiscal year as compared with 7.3% of GDP in the last fiscal year.

(Sourced from Reuters)