Economic woes complicating Pakistan's struggle against Islamic militants are easing thanks to a tough rescue plan backed by the International Monetary Fund, but the program needs more than a year to succeed, the country's finance chief said Friday. The perilous state of Pakistan's economy – which faced trouble even before the global economic crisis – is raising concern that unemployment and inflation will destabilize the nuclear-armed nation's pro-Western government and fan Islamist violence. Shaukat Tarin told reporters the country's budget and trade deficits have already narrowed considerably. The government's budget deficit will decline from 7.4 percent of gross domestic product in the past fiscal year, when ended in June, to between 4 percent and 4.2 percent in the current year, Tarin said. In addition, the nation's current account deficit will decline from 8.4 percent to 6.5 percent, he said. The current account deficit had driven Pakistan to the brink of a currency crash and debt default until the IMF stepped in with a $7.6 billion bailout last November. Inflation, which touched an annual rate of 25 percent in October, is also declining, Tarin said. The cost of imported fuel has dropped sharply in recent months. “If you see all the indicators, we have achieved an improvement,” Tarin said, but added: “If you think that turning it around would happen in three months, it will not be in three months. Such turnarounds take 18 months.” Tarin made no forecast for economic growth, which fell from 6.8 percent in fiscal 2007 to 5.8 percent last year and is expected to decline further this year. The IMF granted Pakistan the emergency loan only after endorsing drastic government reforms. The government has taken a raft of unpopular steps, including slashing subsidies on food and fuel and raising sales taxes to try to balance its books. Pakistan has 160 million people, most of whom are desperately poor.
