SBP report expects inflation by 12 pc in first quarterly

ISLAMABAD: State Bank of Pakistan (SBP) said the tax revenues will stand low owing to the ongoing war against terrorism. The central bank issued its report for the first quarterly, which anticipated that inflation rate will remain between 10 and 12 percent. However, at the time of budget 2009-10, the Government was expecting that inflation would come down to a single digit at the end of the year and it pursued a tight monetary policy throughout the year. However the Government’s expectations were not met due to rising prices of food items, which accelerated the inflation. Inflation declined from a record high level of 25.3 percent in August 2008 to a 22-month low in October 2009 of 8.87 percent. However due to soaring oil prices and increase in electricity tariff during the last couple of months, inflation once again entered into double digits and went up to 10.51 percent in November and 10.52 percent in December 2009. Inflation recorded at 10.52 percent in the last month (December) of previous year as against of 23.34 percent of December 2008. Inflation would further go up in the current month (January) and in the coming months, as the Government has increased the power tariff (gas and electricity prices) with the start of New Year 2010. The prices of electricity would be further enhanced from March, which would further accelerate the inflation so it might be feared that inflation would remain in double digits in the second half (Jan-July) of the financial year 2009-10. The report also said the rate of economic growth is expected to stay at 3.3 percent during the current fiscal year; while, the foreign remittances are expected to remain between $7.80 billion to $8.80 billion. The first quarterly reports said the export volume will remain between $18.50 billion $19 billion; while the volume of imports is expected to remain between $30.50 billion and $31 billion during the first quarter. The fiscal deficit account is expected to remain between 4.7 and 5.2 percent and the current account deficit will range between 3.7 and 4.7 percent. The Agricultural and industrial sectors have been expected to show recovery; however, the biggest challenge would be to improve tax and GDP rate.