UPDATE 1-Pakistan economy expected to grow 3.7 pct this year

Last Updated: Wed, Jan 30, 2013 12:00 hrs

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ISLAMABAD, Jan 30 (Reuters) - Pakistan gross domestic product grew 3.7 percent during the 2011/12 financial year, compared with 3 percent a year earlier, and is likely to post similar growth in the current year, the State Bank of Pakistan said on Wednesday.

The central bank said growth was more broad-based and evenly distributed across agriculture, industry and the services sector, despite chronic energy shortages.

"We are confident that milder flooding this year and the underlying factors that allowed for 3.7 percent growth in FY12 will largely remain in play," the bank said in a report.

Pakistan's financial year runs from July 1.

The central bank said that food prices had remained relatively stable last financial year, bringing down overall inflation to 11.1 percent - better than the 12.0 percent projected earlier.

"It was this easing that allowed the central bank to reduce the policy rate by 200 basis points during the year; this was done to partially revive private sector borrowing and encourage banks to improve their intermediation between private savers and borrowers," the report said.

It stressed the need for structural reforms in the energy sector, public sector enterprises and public finances in a country which still owes the International Monetary Fund $7 billion and badly needs to improve tax collection.

"This, together with a more balanced deficit financing mix in FY13, would ease a great deal of pressure from domestic sources of financing - especially the commercial banks," it said.

(Reporting by Nick Macfie; Editing by Sanjeev Miglani)

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