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Sun 7 Dec 2008 08:11 AM

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Pakistan growth set to fall

Country's economic growth forecast to fall to between 3.5-4.5% this fiscal year, central banks says.

Pakistan's economic growth is expected to fall to between 3.5 percent and 4.5 percent this fiscal year, the central bank said Saturday, slowed by domestic turmoil and the global economic crisis.

The State Bank of Pakistan report also forecast the rate of inflation would range between 20 and 22 percent for the year to June 30 2009.

The projected growth rate is in line with forecasts from the International Monetary Fund (IMF), which last month granted Pakistan $7.6 billion in credit in its first rescue in Asia since the global financial crisis began.

The IMF said that global economic turmoil, higher oil and food prices and a worsening internal security situation meant Pakistan had suffered from "a large increase in the fiscal deficit... rising inflation and a sharp decline in international reserves".

Pakistan's precarious financial situation had caused worldwide alarm due to its role as a key ally in the US-led "war on terror" and its position as the world's only nuclear armed Islamic power.

"Pakistan faced an unprecedented rise in global oil and other commodity prices [in 2007/8], as well as a slowdown in major textile export markets," the bank report said.

"At the same time, import demand was stoked by lower production growth in the real sector [amid power shortages, disappointing crops] and a very expansionary fiscal policy."

It said Pakistan's economy grew by 5.8 percent in the year to June 30 2008, well short of the target of 7.2 percent.

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