Earthquake should not have a major impact on Pakistan's economic prospects

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Despite the tragic loss of life and large-scale destruction, the earthquake that hit northern Pakistan on October 8 is not expected to dampen the country's economic prospects, the IMF said in its annual economic review.Macroeconomic performance over the past few years has been favorable notwithstanding some inflationary and external pressures. Economic growth, driven by manufacturing and agriculture, is estimated to have reached 8.4 percent in 2004/05 (July-June). The international community has pledged $6 billion for earthquake relief and reconstruction; the World Bank and the Asian Development Bank have assessed these costs at over $5 billion.

Pakistan broadly met its 2004/05 fiscal targets. The central bank tightened monetary policy, because 12-month inflation had accelerated to 11 percent in April 2005, and inflation eased to below 8 percent in November. Exports performed well in 2004/05, but imports grew even faster because of rising oil prices and strong demand. And despite high workers' remittances, the current account moved into deficit. Progress was made on structural reform, particularly privatization, as highlighted by the sale of a power utility and the pending sale of 26 percent of a large telecommunications company.

The IMF...