By Mubarak Zeb Khan
ISLAMABAD: The International Monetary Fund (IMF) has said unemployment rate is likely to increase in Pakistan owing to steep decline in foreign direct investment and remittances during the current fiscal year.
‘Unemployment is already high, and economic slowdown is likely to raise it further,’ said IMF Resident Representative Paul S. Ross while briefing newsmen on regional economic outlook here on Thursday.
‘Pakistani industries particularly the export-based industries are facing tough time in the wake of slowing down in demands for the products in the market of developed and Middle Eastern countries,’ he explained.
Mr Paul said that the budget deficit projection for the next fiscal year had been raised to 4.6 per cent from earlier 3.4 per cent of GDP. He said the economic growth for the next year would be around 3.5 per cent with inflation around 7.5 per cent, respectively.
Answering a question, he said that inflation did not decline as it was anticipated. ‘The government will have to take both monetary and fiscal measures to bring it down,’ Mr Paul suggested.
The IMF country director said the third instalment of loan would be issued in July, whereas the government of Pakistan wants more loans in addition to the ongoing $7.6 billion stand-by programme.
He said Pakistan’s request for fresh loan was under consideration. ‘The amount of the loan has yet not been finalised,’ he added.
Replying another question, he said that though Pakistan’s external debt increased manifold this year but it would be manageable. ‘It would be possible for Pakistan to pay the loan without any stress.’
Pakistan’s external debt has increased to 31.9 per cent in 2009 of GDP from 26.5 per cent in 2008.
He said that social safety net would be strengthened by improved targeting of the poor under the Benazir Income Support Programme. The internally displaced people would also be covered under the programme.
He was of the view that the Rs1.4 trillion revenue target for next fiscal year would not be a realistic one. However he added that with rising expenditures the revenue target needed to be raised accordingly.
He agreed with a questioner that delay in the re-imbursement of money on account of war-on-terror by United States may increase stress on the balance of payments of the country.
Giving details of the regional economic outlook, the IMF official said that countries in the Middle East and Central Asian region grew strongly in 2008, but the global crisis was now affecting these economies amid rising financial vulnerabilities.
‘The downturn in the advanced economies and the drop in international commodity prices have hit export earnings, investment flows and remittances of Middle East and South Asian countries,’ he said.