STOCK MARKET WATCH -- Thursday, 9 February 2012

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37. IMF faults Pakistan's optimism on economy

http://www.atimes.com/atimes/South_Asia/NB10Df01.html

KARACHI - The International Monetary Fund (IMF) has criticized Pakistan's economic projections, saying the country's economic vulnerabilities will further increase in the remainder of the fiscal year ending June.

The fund has projected the country's economic growth at 3.4%, against the government's projection of 4.2%, and the fiscal deficit to reach 7% of gross domestic product (GDP), against the government's revised target of 4.7% for the current fiscal year.

The IMF has criticized the State Bank of Pakistan for pursuing a more accommodative monetary policy and financing the fiscal deficit directly or indirectly through liquidity injections via open market operations. The international lender's comments came in



report following the conclusion last week of its Article IV consultation.

Local analysts believe that the strongly worded note is likely to put the falling rupee under further pressure.

The IMF warned that Pakistan's economy remains deeply at risk to both internal and external shocks. A ballooning fiscal deficit could create great difficulties for the government in arranging financing and force it to rely even more on domestic bank borrowing in the absence of any budgetary support from foreign countries or multilateral institutions.