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Inflation outlook disheartening: SBP
KARACHI: The inflation outlook is a cause for concern while increasing the tax base is the toughest structural reform to implement, State Bank of Pakistan (SBP) said in its quarterly report on Friday.The State Bank of Pakistan forecasts average inflation for fiscal year 2010/12 to be between 14.5 and 15.5 percent.
"The outlook for inflation is not heartening ... We fear that inflationary expectations are being ingrained," the report said.
The bank on Saturday left its key policy rate unchanged at14 percent for the next two months, citing a smaller current account deficit and lower government borrowing in saying that immediate risks to macroeconomic stability had subsided.
The report said local fuel prices would have to rise to reflect international oil prices, due to a lack of fiscal space available, which would add to inflation.
On the fiscal side, the central bank forecasts the budget deficit for the year ending June 30 to be between 5.5 percent to6.5 percent of GDP, compared with the government's target to keep it under 5.5 percent of GDP.
"We still think government's revenue targets are ambitious," the SBP said adding that broadening the tax base was the toughest structural reform to implement and "one that needs the greatest political will."
SBP maintained its growth forecast of 2 to 3 percent for fiscal year 2010/11. (Reuters)
Courtesy www.geo.tv