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Pakistani inflation seen at 11% for FY ’09-10

  KARACHI: Pakistan’s expected rate of inflation for the fiscal year 2009-10 has been revised upwards to 11 percent from an earlier projection of 9 percent on higher energy costs, the International Monetary Fund (IMF) said. Pakistan agreed in November 2008 to an IMF emergency loan package of $7.6 billion to avert a balance of payments crisis and shore up reserves. The fund increased the loan to $11.3 billion in July and released a fourth tranche of $1.2 billion last month. “The inflation outlook on yearly basis has been revised from 9 to 11 percent,” the IMF said in its review. “This reflects the rebound in the prices of fuel and a larger second round impact of the increases in electricity tariffs.” Inflation had declined from a record high of 25.3 in August 2008, to a 22-month low in October last year of 8.87 percent. However, inflation in November was 10.51 percent. December consumer prices were seen rising 11.80 percent from a year earlier, according to a survey of 11 analysts and economists. They expected inflation to rise further in January. The Federal Bureau of Statistics is due to release CPI data on, or soon after, Saturday. Given the inflation trend, the IMF said it did not expect any easing of monetary policy. “Remaining inflation pressures and increased domestic liquidity financing of the public sector prevent the central bank from easing monetary policy to support growth,” it said. The central bank cut its policy rate by 50 basis points in November to 12.5 percent. The IMF said it would have given ‘greater weight to inflation risks and preferred a more cautious stance’. It urged the central bank to focus primarily on counteracting inflation pressures and to strengthen its foreign reserves position. The State Bank of Pakistan is due to announce monetary policy for February and March by the end of this month and analysts expect the key policy rate to remain unchanged. reuters

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