By Hamza Ameer

Islamabad, Dec 31 (IANS): Pakistans survival and prime hope of avoiding a financial default depends on the International Monetary Fund (IMF) programme as it has become the only and the most viable option for the countrys current fast crippling and deteriorating economy.

At the moment, Pakistan's shrinking foreign exchange reserves and inflation remain as the two most challenging and key factors for the current government, which are expected to aggravate during the six months of the current financial year.

The sensitivity and critical nature of Pakistan's current economic challenges can be well establishment by the fact that the matter was one of the most important part of the first round of the National Security Committee (NSC) meeting on Friday, in which, the top civilian and military brass were briefed about the worsening challenges the country faces on the economic front.

Just before the first round of the NSC meeting, a monthly economic outlook report was formulated by the Ministry of Finance, which was presented by Finance Minister Ishaq Dar.

As per details of the report, the Ministry has maintained that inflation and low foreign exchange reserves will remain as major challenges for policymakers.

However, it has also maintained that the external deficits were on a regression and would come under control, enough to be able to be financed.

"Combination of low economic growth, high inflation and low levels of official reserves are particularly challenging for policy makers," said the monthly economic outlook report of the Ministry of Finance.

The report, which came a day after the central bank revealed that Pakistan's foreign exchange reserves had fallen below $6 billion, also revealed that there was a staggering $8 billion external financing gap against the requirements for the remaining six months of the current fiscal year.

Inflation has been projected to remain high at over 23 per cent while the growth rate is projected at only 2 per cent.

The widening gap between inflation and the growth rate is because of the low credit ratings and high risk of defaults, which are directly affecting the inflow and materialisation of funding from various lender countries.

It was also briefed during the closed-door NSC meeting that the IMF programme under its Extended Fund Facility (EFF) remained as the only option for Pakistan to comply with and abide by the tough conditions put forward as pre-condition for release and approval of the ninth review and the next tranche, irrespective of how painful and difficult, revival of the programme may result in for Pakistan in terms of inflation.

It was also highlighted that in case Pakistan did not agree to IMF terms and not remained in the programme, the economic revival of the country would not only be prolonged, it would also be under high risk and in turn, would be even more painful.