WASHINGTON, Feb 6: The International Monetary Fund warned Pakistan on Monday that its economy was “highly vulnerable” and urged it to brace itself for further increase in consumer prices and widespread unemployment.

“Unless there are measures taken to rein in the fiscal deficit and the monetary policy tightening that is probably needed right now, pressures on the rupee could continue,” IMF mission chief to Pakistan Adnan Mazarei told a conference call.

The Pakistani currency has declined 0.5 per cent against the dollar in the past year and fell to a record low on Jan 9, on concern that foreign-exchange supplies will shrink as international aid dwindles.

Pakistan’s central bank left the discount rate at 12 per cent in November, pausing to gauge the impact of a two percentage-point reduction since the end of July.

The next rate decision in the $175 billion economy is due on Feb 11.

An $11.3 billion IMF loan to Pakistan expired in September, with disbursements suspended in May 2010 after the country failed to meet conditions attached to it.

Pakistan needed to start repaying the loan in February, Mr Mazarei said.

In its annual assessment of the Pakistani economy, the IMF notes that the country has faced difficult challenges in the past few years.

However, policymakers have taken actions and implemented several reforms.—Anwar Iqbal