NEW YORK - State Bank of Pakistan Governor Yaseen Anwar has said that Pakistan may have to return to International Monetary Fund for financial assistance this year amid an unstable macroeconomic situation.

In an interview with The Wall Street Journal, he said Pakistan could meet its overseas debt obligations for now. But looming repayments to the IMF from a programme that ended last year are likely to test the nation’s finances in the months ahead.

“From next fiscal year we’re going to have stresses. We see reserves going down quite aggressively,” Anwar quoted as saying in the interview which took place at the bank’s headquarters in Karachi. Anwar said the government’s failure to get a massive budget and mounting trade deficit under control could make it difficult to meet more than $4 billion in IMF loans coming due in the fiscal year starting July 1.

“There are many serious challenges,” Anwar said. “I have a rough job here.”

The IMF ended a three-year $11 billion programme with Pakistan last year after disbursing only around $8 billion. The fund withheld final tranche of more than $3 billion in large part because government failed to take steps to reduce its budget deficit. Payments on the loans have already begun but they ramp up in the months ahead, according to WSJ’s dispatch in which Governor Anwar is featured.

The fund and foreign leaders, including US Secretary of State Hillary Clinton, have been publicly critical of Pakistan for failing to tax some of its richest citizens, including politicians, it said. The country’s tax-to-GDP ratio at 9pc is among the lowest in the world, and whole sectors, including agriculture, are exempted, reducing funds to spend on education and create employment opportunities in areas where militancy is rampant, The Journal said.

Meanwhile, large subsidies on electricity and other commodities have kept expenditures high and exerted enormous pressures on state finances, it noted.

“The government has done little to address problem since coming to power in 2008,” the dispatch said. On Friday, Finance Minister Abdul Hafeez Shaikh will announce budget for the year starting July 1. But with elections due by early 2013, Shaikh was keen last week to say there would be no tax surprises in the budget.

“Our tax-to GDP ratio is way below where it should be,” Anwar said. Instead of raising taxes, he said, the government has in recent months increased its direct borrowing from the central bank, effectively printing money to cover the deficit.

The government has borrowed Rs442 billion ($4.8 billion) directly from central bank so far this fiscal year, Anwar said, adding financing requests he can’t turn down. “I still have autonomy, but not enough to bounce a check” from the government, he said.

That borrowing has kept inflation in double digits even as economic growth has slowed to around three percent, according to the dispatch. Anwar said he expected inflation, currently hovering just below 11pc, to pick up “in the next month or two”. The central bank, he said, is unlikely to be able to cut its key lending rate—currently at 12 percent—in the near future. Even at these high rates, companies are finding it hard to get loans in Pakistan as the big commercial banks prefer to make profits buying government treasury bills, he added.

Concerns over economy also have hurt Pakistan rupee, which has been trading around record lows at 92 rupees to the US dollar in recent weeks while central bank hasn’t intervened in the foreign-exchange market. “We let the market force dictate the exchange rate,” Anwar said.

The governor pointed to some positives, WSJ said. Remittances from Pakistanis working overseas are up 20pc at more than $13 billion in the current fiscal year. The central bank has worked out currency-swap agreements with China and Turkey which will help ensure currency liquidity, he added.

The pressure on the trade deficit is also muted as global oil prices have come off highs, although exports took a “nose-dive faster than we expected” in recent months due to lower global prices for cotton, Anwar said. Pakistan’s heavy reliance on oil imports caused a balance-of-payments crisis in 2008, forcing the country to turn to IMF. This time around, concerns are focused on the budget deficit which is 8pc of GDP and the IMF repayment schedule, WSJ said.

Anwar said the central bank won’t repay IMF loans by buying US dollars. That fear sent the Pakistani rupee careening lower earlier this year, but the currency has since stabilised. The bank instead will run down foreign reserves, which Anwar expects to fall by about half in the coming fiscal year to $8 billion, representing less than two months of imports.

The Taliban insurgency and macroeconomic instability have led to a fall off in foreign investment to just over $500 million in the current fiscal year from annual levels over $8 billion a few years ago, the dispatch said.

Low foreign investment is a “real challenge,” Anwar said. He said he had turned down requests from local banks to buy Pakistan business of HSBC Holdings PLC, which announced last month it was pulling out of the country, and is instead inviting foreign bidders.