IMF warns of deteriorating Pakistan economy

By AFP
Published: October 5, 2012

It said the country's external accounts are deteriorating, with incoming investment slowing and the central bank's reserves dropping. PHOTO: FILE

WASHINGTON: The International Monetary Fund said Thursday that Pakistan’s economic situation was worsening and faces a return to double-digit inflation as the government prints money to finance its deficit.

In a mission report, the IMF 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.

“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 IMF 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 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 IMF 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 said.

Reader Comments (27)

  • asim
    Oct 5, 2012 - 12:24AM

    SO what is output of Dr sheikh? He was working with IMF and world bank

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  • Mohammad
    Oct 5, 2012 - 12:31AM

    Who cares? I don’t care if some thing is not going out of my pocket. I focus on other’s pocket to get whatever he has. About being country poor – I don’t believe this. All this analysis is just wrong. As a proof, look at the governement, politicians, and bueracracy. Who is poor? Just observe their dressing. Is it representaion of a poor nation? Let the nation have fun by any means they can ….It’s gone too far already.

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  • Saad Zafarullah Khan
    Oct 5, 2012 - 12:43AM

    Meh! I dont care. Someone survey told me that I live more happily in my country than my neighbor so i really dont care. Let me see now…oh yeah….off i go to burn some shops, kill some brothers, sisters and damage public property because i want to teach the white man a lesson on how to respect me. Byeee

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  • It Is (still) Economy Stupid
    Oct 5, 2012 - 2:02AM

    Zimbabwe of South East Asia in the making.
    Long term consequences of blocking NATO supply for seven months. From commercial contract point of view it damaged the credibility of the Pakistan for not honoring its end of the contract. It gave out a signal that transit route through Pakistan is at the pleasure of non state actors.

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  • Khalid Pathan
    Oct 5, 2012 - 2:09AM

    IMF’s warning is nothing new, it is common knowledge that the govt to meet shortfall is printing 3 to 4 billion Rupees every day. On the one hand the inflation is in double digits, on the other there are well known and well protected individuals who have looted govt funds in billions of Rupees. These powerful extremely corrupt elements constitute the elite of this country. Masses are in abject poverty and a pawn in this game of democracy.

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  • Nasrullah Alam
    Oct 5, 2012 - 2:23AM

    As a Pakistani living in the Gulf, I frequently hear comments from various sources, including well-establish and neutral institutions, that paint a horror vision about Pakistan’s future. We all know that the country is floundering on the sharp rocks of an economic disaster. The IMF report should not be dismissed as a doomsday conspiracy theory; it is real and quite imminent. The country is not only in economic shambles but is being milked by everyone: the corrupt politicians (including the opposition), the arrogant, self-serving and bloated military that needs justification for its existence (the Kashmir dispute, as long as it is kept alive, provides a concocted alibi for their huge expenditure that eats up nearly 35% of the total budget) and now the hate-mongering and hyprocritical mullahs who, with their propensity for uncontrollable violence and religious extremism, have driven away businesses and industry, and transformed the country into a stone-age land waiting to fall down the cliff of doom. What do we do? The obvious choice is that we fragment our country into several parts and let each have its separate autonomous government. The other alterntive is go back to our fold from where we came: India. This will certainly antagonize the mullahs and the military but the question is not whether we want them. The question is whether they want us. Frankly, India now feels that the best thing that happened to it after independence was that Pakistan broke away from it. Let us not engage in our usual ranting about our “greatness” and “superiority” over others. We are stupid and totally blind to think in that way. We have not been taught to engage in self criticism; we blame others for all our misery. We need to be self-critical and realistic, if we are to get anywhere in life, and provide some hope to future generations which will face the uncomfortable choice — join the gangs of violent mobs incited by the mullahs or become nation builders by engaging in positive reconstruction.

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  • curious
    Oct 5, 2012 - 2:24AM

    Just remember IMF is an American institution and would like to control Pakistan to some extent but now and in the future it is the Asian century and Russia and China will have more influence around the world as they have money unlike USA.

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  • Hasan
    Oct 5, 2012 - 2:41AM

    With common people suffering, country’s economy in tatters, millions of people homeless, jobless, hungry… our political leaders and those who actually run the country, are busy making pleasure trips to west, UK, China.. and recently russia.. wasting millions of taxpayers money with zero result.

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  • It Is (still) Economy Stupid
    Oct 5, 2012 - 3:29AM

    @curious: “Just remember IMF is an American institution” Correction IMF is not an American institution. US has only 16.75% of voting power. Japan and Germany have 6%, Italy, France, UK and China around 4% India, Saudi Arabia and Canada around 3% rest with other nations. This report was authored by Country Chief. Even during Musharraf era Pakistan was cited for fudging the numbers by increasing the several thousand tons of increase in production of bitter melon.

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  • Huma
    Oct 5, 2012 - 4:15AM

    @Nasrullah Alam:
    I live in the Gulf, too. I am a management consultant with an international organisation. Whenever there is talk about Pakistan, people cringe and roll their eyes. Pakistan is a dirty word in international politics. I agree — and so would millions of Pakistanis living within and outside Pakistan — with Mr. Alam’s assessment that our country is in very bad shape. Actually, the military does not eat up 35% of the allocations but much more — between 48 and 50%, according to several financial institutions. Is that justified? The military is just whipping up a dead horse called Kashmir which nobody in the world wants to rake up, including our “Muslim friends” in the Gulf who are simply awed by India’s achievements and its huge size. India does have millions of poor people but these people, unlike Pakistanis, have opportunities to prosper if they try. There is corruption in India, too, but politicians are accountable and the guilty ones are put in jail, unlike in Pakistan where they dress in finest clothing and flaunt their ill-gotten wealth. The Jones have to be better than the Smiths! We need peace and stability at any cost, and remove all those rubbish text books that are based on lies and preach hatred against our neighbours. Oh, yes, before I forget: are there no educated, sensible Pakistanis who can see through the criminals that have donned the garb of mullahs who are detroying the social fabric of the country?
    @Curios
    If I were you, I would take the IMF report seriously rather than dismiss it as an American institution that wants to control Pakistan which never really had any freedom from the date of its birth because we were taught how to beg from others and blame others for our problems.

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  • Zia
    Oct 5, 2012 - 4:23AM

    My friends who visit Pakistan tell me inflation is hurting the average household. Law and order is breaking down rapidly. Hold-ups and break-ins into homes has risen in frequency. If the people came out into the streets to loot banks, businesses and burn vehicles, they were justified. If the clergy are behind this lawlessness, they are training the people for the future. This was only a trailer. I my opinion, the mullahs are the future leaders of Pakistan. Lenin overthrew the Russian monarchy under the banner of communism. The mullahs will lead a revolution in Pakistan under the banner of Islam. Never mind if they take Pakistan back to the Stone Age. History of revolutions proves something good comes out of an upheaval, out of tragedy, out of death and destruction. Examples are before you–China and Russia.

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  • Sudheer
    Oct 5, 2012 - 4:32AM

    @Nasrullah Alam
    I am impressed by the comment you wrote. NO, I am not here to gloat over Pakistan’s miseries, not at all. I wish Pakistan to prosper and live peacefully with its neighbors, exactly like any other normal country in the world would do. I am impressed because, every word that you wrote is a truth and nothing but a truth, though, it may sound bitter to your fellow countrymen. In my view, the biggest problem that Pakistan faces today is that, people like you are increasingly becoming a rarity in your country. Without identifying the disease, it is impossible to treat the ailment. It is as simple as that.
    Going by the comments/opinions written by the Pakistanis(supposedly well educated) on the various forums, I came to the conclusion that a vast, vast majority of the people in my neighboring country have become religious fanatics, delusional, retrogressive, suicidal and have completely lost touch with reality. Even the most revered columnists of Pakistan’s print media, ended up dubbing Indian readers’ comments as RAW inspired! Can anything stoop lower than this?
    Pakistanis persistently complain about the lack quality leadership, but, I think a country is judged by the quality of its people. We in India have such a corrupt politicians that no Pakistani can even imagine. However, I am proud to say that the sheer enlightened mindset of our people is driving India forward. The second round of reforms initiated by the Manmohan Govt. do stand as a testimony to it. No politician, irrespective of his/her party affiliation, was ready to go for this unpopular move, but, the will of the highly educated, patriotic middle class ultimately prevailed.
    Pakistan’s civil society must take cue from its most familiar and close neighbor India, to put their country in the right direction.

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  • Sajida
    Oct 5, 2012 - 7:43AM

    @Nasrullah Alam If you do not like the hate monguring Mullahs, you should leave the Gulf. Gulf countrees are financing them as they are using oil funds to spread Wahhaqbi beliefs. Meanwhile the Gulf itself is sitting on the edge of disaster. It is living the oil curse. A monoeconomy. While Dubai relies on westerners living on debt-which bubble when it bursts will not be pretty. Dubai relies RE- a waste of capital and trade. And it is against Pakistan building of new port as it would take away its trade. hey it knows what an unstable base it has.

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  • Sajida
    Oct 5, 2012 - 7:48AM

    @curious what is IMF saying about endless debt buying in US Uh easing. If petrodollar went things would get ugly fast. Oh and what about QE in UK. That country has no economy except one that relies on foreigners investing in London economy (who seem clueless as this country is not worth investing in) and casino finance.

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  • Oct 5, 2012 - 8:13AM

    Poor economy will inevitably result in lawlessness, people will come out to the streets and chaos will ensue. This is dangerous in a country where most think US and India are the enemies and support the Taliban ideology.

    Nukes+Mullahs+Terrorism+Bad Ecomomy = Nightmare.

    Pakistanis are a hopeful lot. They will still believe China with around $3 Trillion worth of reserves will come and rescue it. Optimism is good, but this is ridiculous!

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  • Oct 5, 2012 - 8:42AM

    Pakistan must continue to build more nukes to fight a war it will never fight with India. Pakistan should keep doing this till it simply goes bust. India will continue to have small and big issues with Pakistan exactly like we have issues with Nepal, Bangladesh and Sri Lanka. India will never again go to war with Pakistan. We only need a deterrent against Pakistan and we already have it. As an Indian I am aware that we cannot afford it for it will take us back to Stone Age and the majority of us have no interest in this proposition. We have no issues Pakistan continuing to spend money like water trying to keep up with India. The question people of Pakistan have ask is – What exactly do they want? Fly their flag at the Red Fort (will never ever again happen) or get their kids educated and give them a bright future?

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  • H.A. Khan
    Oct 5, 2012 - 9:00AM

    Please make radical changes in working of FBR.
    Get rid of PRAL who has let down the nation,FBR and business community.

    Ministry of Finance has failed the nation

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  • Muhammad Fahad
    Oct 5, 2012 - 10:03AM

    Well its a very disappointing situation for us, we must think about it, actually we don’t need to discuss this particular problem again and again what actually need is to find the symptoms behind this particular issue , our govt. doen’t have any rationale for this to overcome from it, if we completely relied on IMF and other doner agencies, then how can we get rid of this, our govt. should take some authentic measures to meet its deficits and other fiscal debts. strengthen the fiscal and monetary policies and utilize the resources effeciently by using its labour force. All these things needs a proper lawa and order situation in the country. Just Think !

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  • Haseeb Bhatti
    Oct 5, 2012 - 10:09AM

    Its a typical IMF report, which always have 3 things to stress, 1) Raise Taxes, 2) Cut expenditure 3) cut subsidies. Strangely it comes just after the ADB raised the GDP growth forecast for Pakistan, even with the flood havoc and energy shortages. Which other taxes the economists at IMF wants to put on Pakistan. People are paying fee on televions in their electricity bills. Its not spared even to electricity connection in the mosques, imam bargah’s and perhaps on madrassas. No body neither in the CBR or in the IMF wants to calculate the indirect taxes imposed on the people. In utility bills, in fues costs, in items of daily use even medicines. They say the number of income tax payers should be increase, but please for once calculate how much tax (direct and indirect), people are alrady paying.

    About subsidies which there exist now, is not mentioned, fertilzers for the backbone of economy, agricultural production are available more than 200 percent at the cost which they were in the recent past. Petrol and diesel all know about the price. Where are subsidies?.

    I wonder how highly paid staff memeber at IMF look at the things in countries like Pakistan.

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  • Hamza Humayun
    Oct 5, 2012 - 11:18AM

    yes we all can see the rot in the society, but how do we overhaul, is there a swift solution to it, i don’t think so, for me the focus now has to be on the quality of primary/secondary education, we have totally turned our system into focusing students as to how to get marks, instead of learning, to inculcate tolerance and acceptance of others there is nothing more powerful then reading !!!

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  • andleeb (Canada)
    Oct 5, 2012 - 12:46PM

    @Nasrullah Alam: pffft ! You are just another Indian troll pretending to be a Pakistani. We may have no electricity, no food, no hospitals etc., but please read the world statistics : We are a happy nation. And we are happy to live in darkness with power cuts etc.

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  • andleeb (Canada)
    Oct 5, 2012 - 12:58PM

    @Sudheer: I’m amused at how you Indians gloat over another Indian’s comments (who pretend to be a Pakistani). Indians in these columns are a pathetic lot. You forget Pakistan is a major atomic weapons power. America respects our power and dances to our tune. The world will never allow Pakistan to fail and IMF will give us as much aid as we want.

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  • Jat
    Oct 5, 2012 - 1:39PM

    @Nasrullah Alam: Bravo ! It takes a very brave person to say and admit, what you just did. Hope your countrymen have the good sense to listen to you.

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  • ali
    Oct 5, 2012 - 2:48PM

    @andleeb (Canada): long live mullah power…..

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  • iTroll
    Oct 5, 2012 - 3:56PM

    @andleeb (Canada):
    We are a happy nation. And we are happy to live in darkness with power cuts etc.
    This is actually the root of all problems in Pakistan, you are happy and don’t even try to improve..think about it.

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  • meekal a ahmed
    Oct 5, 2012 - 9:39PM

    @Haseeb Bhatti:

    That is part of the problem. The subsidies sit on the budget and we can’t see them!

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  • Harry Stone
    Oct 6, 2012 - 9:27AM

    @Hasan:

    Yes but remember you have nuclear weapons which makes all PAKS happy even if they go without food or medical care

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