IMF fears security concerns may further limit capital inflows to Pakistan

The International Monetary Fund (IMF) on Tuesday warned the outlook for Pakistan’s economy for the current fiscal year ending June 2012 is “challenging” adding that the global risk aversion and security concerns might further limit capital inflows to the

The fund held talks with the Pakistan finance ministry officials during Nov 9-19 in Dubai to discuss and assess the condition of country’s economy. IMF holds talks with its member governments every year to evaluate the progress of their economies and the
recent meeting with Pakistan officials was also part of annual economic discussion between the Fund and Pakistan.

Announcing the outcome of the talks, IMF in its handout said that constructive discussions were held and the authorities of Pakistan have expressed commitment to implement reforms in an attempt to enhance growth. IMF said that during the meetings, country’s
recent economic performance and the challenges ahead, in light of uncertainties in the global economic environment were discussed.

According to a data from the State Bank of Pakistan, Pakistan’s current account deficit for the July-October period stood at a provisional $1.555 billion, compared with $541 million in the same period last year. A US$11 billion IMF loan programme ended in
September after the country failed to meet fiscal and other targets.

IMF, in its statement, said that the Pakistan authorities expressed their determination to strengthen macroeconomic policies and continue to following reforms to enhance country’s medium-term growth prospects.

 “Pakistani authorities and the mission agreed that containing the budget deficit in 2011/12, a cautious monetary policy, and a responsive exchange rate would reduce vulnerabilities, contain inflation and protect Pakistan’s international reserves,” the IMF
statement said.

Pakistan’s foreign exchange reserves for the week ending November 11 stood at $17.03 billion, as compared the record reserves of $18.31 billion in the last week of July 2010.

The fund urged that a cautious monetary policy and a responsive exchange rate is necessary to reduce vulnerabilities, contain inflation and protect international reserves of Pakistan.