Inflation rate to be eased to 5% in medium term.

ISLAMABAD -- The government is doing much better than the International Monetary Fund projection with respect to most of the macroeconomic indicators including inflation rate which is expected to come down to around 5 percent in the medium term, spokesman of ministry of finance said.

With regard to inflation outlook, IMF has lowered Inflation projection for FY 2019-20 to 11.8 percent, down from 13 percent earlier on account of this fact that the administrative and energy tariff adjustments are expected to offset the effects from weak domestic demand, thereafter, inflation is expected to converge to 5-7%.

However, the Pakistan government would do much better than IMF projection, as inflation during July-November was 10.8 percent and with measures taken the target of inflation would be brought down to 5 percent over the medium term, the spokesman said in a statement issued here on Sunday.

With regard to the external sector, significant improvement has been witnessed. Overall, Current Account Deficit (CAD) has shrunk by almost two-thirds (74 percent) in the Q1 FY 20 compared to the same period of FY 2019.

The CAD is projected to decline to 2.4 percent of GDP in FY20 (4.9 percent), which is lower than earlier IMF forecasts of 2.6 percent.

Similarly, total imports also fell by 23 percent year-on-year in Q1 of FY2020, but imports of machinery and equipment were more resilient, rising about 2 percent y-o-y. Exports are showing some sign of recovery, up 2 percent y-o-y for the same period with 17 percent volume growth, mainly driven by food and textiles.

The report states that transition to a market determined exchange rate has allowed the rupee to find its new equilibrium quickly, thereby, successfully correcting the 'exchange rate overvaluation' of the last 5 years.

Referring to a recent report published by IMF, the finance ministry statement said that the report had also acknowledged strong fiscal performance in the First Quarter of FY2020 while stating Primary surplus of 0.6 percent of GDP and an overall deficit of 0.6 percent of GDP, about 1 percent of GDP better than programmed.

In addition, Tax revenue growth was in double-digits (net of refunds) even though customs receipts and other external sector related taxes have suffered due to import compression.

The spokesman added that during first half of FY2019-20, government non tax revenue collection has hit Rs 878 billion which was 75 percent of full year budgeted collection of Rs 1.16...

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