ISLAMABAD (Bloomberg) -- Pakistan, on the verge of a bailout from the International Monetary Fund, expects the economy to grow at the slowest pace in seven years as inflation averages 20 percent and industrial and farm output slows.

The $150 billion economy may grow 4.3 percent this fiscal year to June 30, lower than the earlier predicted 5.5 percent, Waqar Masood, secretary at the finance ministry, said in a phone interview on Wednesday. Inflation will exceed the government’s previous target of 12 percent, he said.
Pakistan is counting on a $7.6 billion IMF rescue this month to avoid defaulting on its debts after foreign-exchange reserves shrank 75 percent in a year to $3.5 billion. Growth may slow after central bank governor Shamshad Akhtar increased the benchmark interest rate to 15 percent from 13 percent as part of IMF loan condition to curb inflation.
The Washington-based IMF may approve Pakistan’s first bailout in four years and release funds as early as Nov. 21, Massod said from the capital, Islamabad.
Consumer prices in Pakistan rose an average 24.6 percent in the first four months of this fiscal year, according to data on the Web site of state-owned Federal Bureau of Statistics. The economy expanded an average 6.8 percent in the past five years, according to the government.
“We expect inflation will slow in coming months as global crude and commodity prices have reduced,” said Masood. The government will formally revise the economic targets later this month or next month, he said.
------------ Lower than target
Farmers are likely to produce 12 million bales of cotton this year, less than the target of 14 million, he said. Agriculture accounts for 21 percent of the country’s gross domestic product.
Pakistan needs the IMF loan to help it win additional aid from a group of other lenders and donor nations, including the U.S., UK, China, and Saudi Arabia. The group’s Nov. 17 meeting in Abu Dhabi adopted a “work plan” for financial help to Pakistan, the foreign ministry has said.
“We are trying to hold a ministerial meeting of `Friends of Pakistan’ group next month,” said Masood. “The prospects of more financial aid and investment from donor countries are good.”
Pakistan left its last IMF program in 2004 with a credit rating from Standard & Poor’s of B+, four levels below investment grade. S&P on Nov. 14, one day before the latest IMF loan was announced, cut the nation’s rating to CCC, citing a risk of default on external debt payments.
Moody’s Investors Service, which rates Pakistan’s debt at B3, said Nov. 17 the rating remains on review for a downgrade as the country needs to show it will secure additional assistance from donors and other lenders.
Pakistani rupee in October plunged to an all-time low and the balance of payments deficit in the first three months of the fiscal year started July 1 widened to $3.95 billion, from $2.27 billion a year earlier. The deficit reached a record $14 billion last year.