Economy growth rate may fall to 0-2%

The floods could knock down the country’s economic growth for 2010-11, officials said on Monday.

KARACHI: The worst floods in decades could knock down the country’s economic growth for fiscal 2010-11 to between zero and two per cent, officials said on Monday, fuelling concern about the country's stability.

The Asian Development Bank (ADB), assessing flood damage and Pakistan's needs along with the World Bank (WB), said last week economic growth could be three per cent. The finance ministry said the country would miss this year's 4.5 gross domestic product growth target, but did not give another figure.

Sakib Sherani, a senior adviser to the finance ministry, said there was a whole range of growth estimates which would be revised once the actual impact of the floods became clear.

"We think zero percent is the lower bound of these estimates," Sherani told Reuters, adding that this was his own estimate, and not an official figure from the finance ministry.

The economy grew 4.1 percent last year.

He said the zero growth estimate was based on the economic impact of the damage caused to key crops and livestock, adding an estimated 25 per cent of the cotton crop has been affected. The textile industry, which accounts for more than 50 per cent of total exports, depends on the cotton crop.

Inflation could go up to 25 per cent

The International Monetary Fund (IMF) will review Pakistan's budget and macroeconomic prospects during talks with senior officials in Washington starting on Monday.

The meetings are set to focus on the future of Pakistan's $10.66 billion IMF programme agreed upon in 2008.

If the IMF agrees to ease the programme's targets, or extends the repayment period that would ease the government's financial burdens.

Sherani said inflation could reach as high as 25 per cent, compared with the 2010-11 target of 9.5 percent.

Sherani said lower commodity prices could prevent prices from spiking up. "We will have to import essential items and if international commodity prices go down, then inflation at 25 per cent will be less probable," he said.

The Pakistan Planning Commission's forecast was not as grim. "I agree the growth will come down but at the same time, the zero per cent is cruel, it will be one to two per cent," said Nadeem ul Haque, deputy chairman of the commission, which formulates and monitors implementation of development projects.

"There will be a negative impact but when reconstruction starts in November or December and people go back to their lands and restart farming, there will be a positive impact."