IMF warns of deteriorating Pakistan economy, inflation

     The International Monetary Fund has said Pakistan's economic situation is worsening and it faces a return to double-digit inflation, as the government prints money to finance its deficit. The IMF, in a mission report, said Islamabad urgently needs to address deep problems in its energy sector, including costly subsidies and poor distribution, while boosting growth to meet a rapidly growing population, reports The Express Tribune. " Pakistan faces a challenging economic outlook. GDP growth in 2012/13 is projected to be in the 3-3.5 per cent range, which needs to accelerate in order to absorb the growing labor force," the report said. "Inflation has fallen recently but is expected to be back in double digits by the middle of next year if corrective measures are not taken to reverse monetary financing of the fiscal deficit," it added. The IMF said the country's external accounts are deteriorating, with incoming investment slowing and the central bank's reserves dropping. "Decisive and far-sighted action is needed to address this challenging outlook," including raising taxes and cutting expenditures, especially subsidies, the report said. It warned that allowing inflation to rise is hurting the population at large. "Underlying inflation remains high and represents a regressive tax that disproportionately hurts the poor," the IMF added.

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