Pakistan's inflation outlook is a cause for concern while increasing the tax base is the toughest structural reform to implement, the country's central bank said in its quarterly report on Friday.
The State Bank of Pakistan forecasts average inflation for fiscal year 2010/12 to be between 14.5 and 15.5 percent.
"The outlook for inflation is not heartening ... We fear that inflationary expectations are being ingrained," the report said.
On the fiscal side, the central bank forecasts the budget deficit for the year ending June 30 to be between 5.5 percent to 6.5 percent of GDP, compared with the government's target to keep it under 5.5 percent of GDP.
"We still think government's revenue targets are ambitious," the SBP said adding that broadening the tax base was the toughest structural reform to implement and "one that needs the greatest political will."
The central bank maintained its growth forecast of 2 to 3 percent for fiscal year 2010/11. [while neighboring countries grow at 8-10%]
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