IMF: Pakistan economy on track but inflation looms

 The International Monetary Fund said Saturday that Pakistan'seconomic reform programme remained broadly on track, but warned over risinginflation.Pakistan received a $6.7 billion IMF bailout package last year to help the countryachieve economic reforms, particularly in its troubled energy sector."The IMF is encouraged by the overall progress made in pushing ahead with policiesto strengthen macroeconomic stability and reviving investment and growth," JeffreyFranks, the fund's mission chief for Pakistan, said in a statement in Islamabad. The IMF's Pakistan staff mission visited Dubai from May 1-9 to conduct discussionson the third review of the bailout package, which was approved by the fund'sexecutive board last September.The mission met senior officials from the finance ministry and the State Bank ofPakistan (SBP), weeks ahead of a scheduled $550 million fourth loan tranche thatPakistan is set to receive."Economic indicators are generally improving, with growth gaining momentum,external finance improving, and credit to the private sector rising," Franks said, butadded that core and headline inflation were also rising.The inflation rate currently stands at 9.2 percent but the IMF wants Pakistan to "target an additional reduction in inflation towards their medium-term goal of 6-7percent in the next fiscal year", which starts on July 1."Led by large-scale manufacturing and service sectors, GDP will expand by about 3.3percent in financial year 2013-14, accelerating further to reach four percent nextyear," he said.The mission also noted an improvement in the balance of payments situation andefforts being made by Pakistan to build up SBP reserves and stabilise sentiment inthe foreign exchange market."The authorities' reform program remains broadly on track," Franks said, describingas "strong" the fiscal performance of the government during the first nine monthsof the current financial year 2013-14.At a joint press conference with Franks on Saturday, Pakistan's Finance Minister Ishaq Dar said the country's foreign exchange reserves had soared following thebailout package."I also have a good news to share -- the country's foreign exchange reserves havejumped to $12.9 billion," he said, adding they will rise to $15 billion by the end ofSeptember.The reserves stood at $7.8 billion before the bailout last year.A report on the third review has been tentatively scheduled for consideration by theIMF Executive Board in late June, Franks said.If approved, it would make about $550 million available to Pakistan, he added.Cash-strapped Pakistan, plagued by a bloody homegrown Taliban insurgency, isbattling to get its shaky economy back on track and solve a chronic energy crisisthat cripples industry.As well as the Taliban threat, Pakistan is also facing a rising tide of sectarianbloodshed mainly targeting minority Shiite Muslims, and rampant criminal violencein the economic capital Karachi.