Inflation Rate to Come Down To 5% In the Middle Term

While mentioning a recent report by IMF, the finance ministry said that the report also took in the strong fiscal performance in the first quarter of FY20

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The inflation rate is expected to come down to 5% as the government has been performing better than the International Monetary Fund projection with respect to most of the macroeconomic indicators, according to the spokesman of the Finance Ministry .

With respect to the inflation outlook,the IMF has reduced the inflation projection for FY 2019-20 to 11.8% from 13%, on the account that the administrative and energy tax adjustments will balance the effects from weak domestic demand. So, inflation will probably converge to 5-7%.

In a statement issued by the spokesman on Sunday, the Pakistani government is doing better than the IMF projection as inflation during July-November was 10.8% and with measures taken, this figure will be brought down to 5% over the medium term.

In the external sector, improvement has been noticeable. The Current Account Deficit (CAD) has been cut down by two-thirds (74%) in the Q1 FY20, as compared to the same period of FY19.

The CAD is expected to decline to 2.4% of GDP in FY20 (4.9%), this number is lower than the IMF’s prediction of 2.6%.

The total imports also fell by 23% year-on-year in the first quarter of FY20, but imports of machinery and equipment rose by 2% year-on-year. Exports are improving, a 2% increase year-on-year has been seen with 17% volume growth, mainly driven by food and textile.

The reports show that the transition to a market-determined exchange rate has allowed the rupee to find is stability, successfully correcting the ‘exchange rate overvaluation’ of the previous five years.

While mentioning a recent report by the IMF, the finance ministry said that the report also took in the strong fiscal performance in the first quarter of FY20, while stating primary surplus of 0.6% of GDP and an overall deficit of 0.6% of GDP, which is 1% better than programmed.

While talking about the government’s performance on the economic front, he added that Pakistan’s economy has seen improvement in recent months.

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