ISLAMABAD (June 10 2008): The World Bank and the International Monetary Fund have forecast a growth rate of 3.5 percent in 2008-09, while the Planning Commission has projected a 6.5 percent growth, well-placed sources told Business Recorder here on Monday.
“Pakistan should not see the world through the eyes of the Planning Commission,” sources quoted the IMF mission as saying during recent meetings with the officials of the Finance Ministry.
“The WB and the IMF are not expecting more than 3 or 3.5 percent GDP growth next fiscal year, however, the government does not agree with this assessment,” the sources added. The WB and the IMF missions were in Islamabad for almost a month in May to analyse the performance of the Pakistan economy; and based their assessment to determine the conditionalities that would be imposed on lending from the international financial institutions.
The sources said that the IMF had set an impossible conditionality for the government ie to bring the deficit down to 4.3 percent which would then allow the World Bank to release the loan of $500 million for balance of payment support. Another conditionality, reportedly, was for the government to desist from subsidising domestic fuel prices.
“These agencies are pressurising the government to adopt a formula for automatic fuel adjustment from July onwards, and increase electricity tariffs substantially,” the sources maintained. The WB and the IMF missions pointed out that since furnace oil prices have reached Rs 45,000 per ton and per unit electricity generation cost has reached Rs 9 kWh, the government must minimise the subsidy. These agencies also urged the government to ensure food security and finalise a policy in this regard.
The sources said that the government has been asked to take measures for fiscal adjustments so that current account deficit could be brought to an acceptable level. Allocations for the Public Sector Development Programme (PSDP) was also one of the areas of concern for both the missions as according to them some of the allocations were unaffordable, the sources added.