ISLAMABAD – The Pakistan Economy Watch (PEW) on Sunday said the monetarypolicy of the State Bank has exposed the tall claims of rapid economicdevelopment by the former government and confirmed that economy is sailingin troubled waters.

Hike in the discount rate also indicates that now policymakers arepreferring stabilisation over the economic growth which will initiate theprocess of contraction of the troubled economy, it said.

Economic contraction will result in unemployment and cuts in thedevelopmental budget which will hit the social sector, said Dr. MurtazaMughal, President PEW.

He said that the deficit has reached 6.8 percent surpassing the target of5.5 percent while the current account deficit from July to May has reachedto 16 billion dollars which was 11.1 billion dollars during last year.

The government is failing to control the situation despite repeated erosionin the exchange rate, it has failed to boost exports substantially orreduce unnecessary imports which have taken a toll on the forex reserves,he said.

Dr. Murtaza Mughal said that a little improvement in exports andremittances aren’t enough and the government will be compelled to revisepetroleum and electricity prices but it will not save it from knocking thedoor of IMF as billions of dollars are needed to keep the country frombankruptcy.

He said that water scarcity has been damaging the agricultural sector onwhich majority of the population depends while manufacturing is to take ahit from increased interest rates.

The caretaker government has started the groundwork for the IMF loan but itis leaving the final decision to the elected government which is veryencouraging, he said.