According to the International Monetary Fund, Regional Economic Outlook, the global financial crisis and recession pose risk to Pakistan's economy with it growth, exports, remittances and capital inflow could decline further in the next fiscal year.

The Outlook said that a prolonged economic slowdown in oil exporting countries could translate into lower growth in neighboring trade partners including Pakistan by declining exports, private capital inflows, workers remittances and Foreign Direct Investment.

Mr Paul Ross resident representative of the IMF at a media briefing about the finding of the Outlook said that the ultimate outcome could be increase in poverty.

Mr Ross said that the policy priorities of Pakistan should be of consolidating macroeconomic stability and ensuring protection of vulnerable groups. The relaxation in fiscal deficit target by the IMF for next fiscal year, increase from 3.4% to 4.6% of the GDP, would provide space to Pakistan for additional social spending. Decline in inflation was slower than the IMF anticipation. IMF was discussing growth and inflation projections with Pakistan for the next fiscal, which would be finalized in June & July. He added that Pakistan has requested to the IMF for additional assistance but the request is still under consideration, however to a question about the release of next tranche.

Mr Ross said that high inflation was a big concern for the IMF which could be reduced by taking measures in both the fiscal and monetary policies. To a question whether the IMF would allow Pakistan to use the USD 7.6 billion standby arrangement for budget support if the pledges made at the Friends of Pakistan did not materialize

He said that a decision to this effect could only be taken at that time. A substantial decline was anticipated in the private capital inflows which are expected to go down from USD 5.1 billion in 2008 to USD 3.1 billion in 2009. It was not possible for the government to reduce current expenditures in many areas but the subsidies are being reduced as these were not targeted to the poor. Both the rich and poor have been benefiting from these subsidies.

The IMF was bit optimistic about Pakistan's real GDP growth as its projection is 3.5% for 2009-10 compared to the 3.3% government forecast. The nominal GDP projection for the next fiscal year is USD 170.2 billion, CPI is 7.5% and broad money growth is 7.5%. The total revenue is estimated at 15.2% of the GDP and total expenditure and net lending at 19.6% for the next fiscal year. The total debt of the government is projected at 56.9% of the GDP whereas total gross external debt of the country will increase from 26.5% to 31.9% of the GDP in the next fiscal year. The current account deficit is projected to be at USD 8.3 billion that is about 4.9% of the GDP for the next fiscal year.

(Sourced from AAJ TV)