Manila : Pakistan's economy faces considerable challenges, and though recently falling, it’s still high inflation may well accelerate, Asian Development Bank (ADB) warned in a new report on Wednesday.
In its annual economic publication- Asian Development Outlook 2011- the ADB noted that last year's unprecedented floods in Pakistan hit the agricultural output hard and inflicted widespread damage on transport and communication in the country.
"Fiscal developments are worrisome: the rollback in recent oil price rises, a partial increase in electricity tariffs, delays in carrying out revenue-increasing measures, broad tax exemptions for residents of flood-affected areas, and continued heavy fiscal support to state-owned enterprises add to pressures on the fiscal deficit," report said.
"The current account balance is improving, but capital and financial inflows continue to decline. Still, despite devastation and economic distress, growth will likely stay positive," it added.
It noted that current expenditure in the country was under pressure due to 50 percent wage increase for government workers, "exacerbated by government failure to budget adequately for subsidies needed to cover the gap between notified and cost-recovery electricity tariffs."
Referring to development challenges being faced by Pakistan, report said that current pattern of lowerimports, lower development spending and exploding unproductive current outlays "undermines domestic and external confidence in the economy's prospects and deters investment.""Pakistan therefore needs to develop a systematically transparent revenue policy, and operate it effectively," it stated, adding that it will also be critical to design and implement policies that bring energy sector to financial viability.
