Islamabad - The International Monetary Fund (IMF) has
allowed Pakistan to cut interest rates this month or in April as the
core inflation comes down, a top finance ministry official said
Monday in Islamabad.
The permission was granted during the almost two weeks of talks
between the IMF and Pakistani officials that ended in Dubai last week
for the review of a 7.6 billion dollars programme approved to save
the country from default on external payments.
'Finally, we remained able to convince the IMF for lowering down
discount rates keeping in view declining trend in core inflation,'
Shaukat Tarin, advisor to prime minister on finance told reporters.
Pakistan, a key western ally in the ongoing war against terror,
increased the discount rate by 500 basis points in order to tame
inflationary pressures, but the measure also resulted in slowing down
the economy.
Core inflation, Tarin said, stands at 19 per cent while the
discount rate was in the range of 15 per cent, leaving a gap of four
per cent. But he said Pakistan's negotiators succeeded in convincing
the IMF to let them lowering the discount rate if inflation began to
recede, as it is now doing.
He said the country had envisaged the inflation target for the
next fiscal year 2009-2010 at six per cent as compared to 20 per cent
for the current fiscal year ending on June 30. Monthly inflation is
to be reduced to 10 per cent by June 2009.
Pakistan received the first tranch of 3.1 billion dollars from the
IMF in November. It is expecting the release of the second tranche of
840 million dollars after the IMF Executive Board meets by the end of
March.
Tarin said that the gross domestic product (GDP) target was
revised downward from 3.4 to 2.5 per cent for 2008-09 during talks
with the IMF in Dubai, while the GDP growth target was foreseen at
4.0 per cent for 2009-2010.
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