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Pakistan’s central bank said the nation’s economy may miss growth targets and inflation may rise as high as 22 percent.

The State Bank of Pakistan, in an annual report today, said the economic growth rate during fiscal year the fiscal year that is about to end is expected to be around 3.5 percent to 4.5 percent compared with a target of 5.8 percent.

Pakistan’s economy may expand as little as 3 percent this fiscal year in response to a “tightening” of economic policies and slowing growth among the nation’s trading partners, the International Monetary Fund said in a statement this week. That would be the slowest pace since 2000, when South Asia’s second- largest economy grew 2 percent online payday loans.

In order to secure an IMF loan, Pakistan’s government and central bank have agreed to eliminate electricity subsidies by the end of June 2009 and to continue to adjust fuel prices to reflect international prices. That should reduce the budget deficit as a proportion of gross domestic product to 3.3 percent by 2009-10 from 4.2 percent in 2008-09 and 7.4 percent this year, the IMF said.

Pakistan was forced to turn to the IMF for a bailout after its foreign reserves shrunk 75 percent in a year to $3.45 billion.

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Timothy Geithner, President-elect Barack Obama's choice for U.S. Treasury Secretary, is seeking to push Federal Deposit Insurance Corp. Chairman Sheila Bair out of office.

Geithner, president of the Federal Reserve Bank of New York, has argued Bair isn't a team player and is too focused on protecting her agency rather than the financial system as a whole, according to two congressional officials and a person familiar with his thinking. Bair has battled with Geithner and fellow regulators over aid to Citigroup Inc. and other emergency actions, making her enemies in the Bush administration.

“The idea of having an independent actor on the stage with you who might not be singing the same tune can make you nervous,” said Wayne Abernathy, a former Treasury official who is now executive vice president with the American Bankers Association in Washington. “They recognize that she's a very independent person.”

It isn't clear that Obama would ask Bair to step down. Such a move would be fraught with political risk for the new administration, especially on Capitol Hill, where Bair's campaign to rework mortgages for struggling homeowners has won respect from top lawmakers, including Senate Banking Committee Chairman Christopher Dodd and Barney Frank, his counterpart in the House.

Bair's spokesman Andrew Gray declined to comment. Obama's transition spokeswoman Stephanie Cutter had no immediate comment.

Obama Plan

Even if Bair remains at the FDIC, the Obama economic team has decided that she won't play a central role in policy, the people said. While Bair, like Obama, has favored aid for Main Street as well as Wall Street, the new administration will have its own plan to help the millions of people facing eviction from their homes. It will also have its own team to run the government's $700 billion bailout program, they added.

Pushing out the head of the FDIC, which oversees more than 5,000 banks and savings institutions, would clash with the pledges made by Obama's own transition team. Bair has become the most prominent Republican regulator, and the incoming administration has promised to give Republicans important jobs.

“You'll see Republicans again, in his administration, not just a token member in the Cabinet, but you'll see them spread throughout the administration,” transition director John Podesta said in an interview with Bloomberg Television last week.

Frank Proposal

Bair, who was appointed by President George W. Bush to a term as chairman that ends in 2011, has been lobbying behind the scenes for a stepped-up role in the Obama administration. Frank, a Massachusetts Democrat, has suggested that she be named to a special post to oversee government-wide programs to stop foreclosures.

Bair “brings a lot of credibility” on crafting ideas to ease the mortgage crisis, said Kevin Petrasic, a former Office of Thrift Supervision official who now works at law firm Paul, Hastings, Janofsky & Walker in Washington.

In public comments, Bair, 54, has indicated she'd like to stay on, while she'd be prepared to depart if Obama wants someone else to take the helm at the FDIC.

She said at a press conference in Washington Nov. 25 she'd work “in whatever role they want me in this institution to play.” The month before, Bair said in an interview on “Political Capital with Al Hunt” on Bloomberg Television that “I'm happy to go back to academia too. So I want to be flexible for the next president.”

Protecting Fund

Geithner became increasingly wary of Bair as she worked with the other regulatory agencies on emergency bailouts of banks in recent months fast cash advance. The New York fed chief has been concerned that Bair was more worried about keeping the FDIC's insurance program protected than she was about the entire financial system, one person said.

Bair twice sparred with her colleagues at the Fed and Treasury over efforts involving Citigroup. In October, she acquiesced to Wachovia Corp.'s agreement to a takeover by Wells Fargo & Co. days after agreeing to back an initial deal with Citigroup. Geithner was concerned that allowing the Citigroup transaction to fail would inhibit other lenders from working with the FDIC on any subsequent rescues, the people said.

Wells Fargo offered about $15 billion for Wachovia, compared with Citigroup's $2.2 billion deal to acquire Wachovia's banking operations, and didn't need any FDIC aid.

Citigroup Crisis

Citigroup's position weakened, with its shares losing as much as 65 percent after the failed Wachovia deal amid a collapse in investor confidence — precipitating another rescue attempt.

Again, Bair held out for concessions as the Fed and Treasury sought to shield Citigroup from losses in its holdings of toxic assets. Bair insisted on getting preferred shares for the FDIC in the New York-based bank. She also demanded that Citigroup agree to implement mortgage modifications according to a model developed by her agency.

At one point during a Nov. 23 Fed board meeting about the Citigroup rescue, Chairman Ben S. Bernanke stepped out to take a call from Treasury Secretary Henry Paulson. Returning a few moments later, Bernanke told his colleagues that the secretary was still locked in negotiations with Bair, whose demands were delaying the deal.

The political peril of ousting a popular regulator who has sided with struggling homeowners and sought tougher conditions on financial firms could fuel charges that Geithner and other Obama appointees are too closely connected to Wall Street.

'Willing to Stand Up'

“I don't think you want an FDIC chairman who isn't willing to stand up,” former FDIC Chairman William Isaac, who is now head of Secura Group LLC in Falls Church, Virginia, said in an interview.

On other issues, too, Bair has stepped out in front of her Bush administration colleagues.

As the mortgage bust deepened, Bair repeatedly pushed Fed and Treasury officials to boost aid for homeowners.

In 2007, Bair told lawmakers the Fed should use its authority over home-loan standards to tighten oversight and crack down on the practices that contributed to the subprime mortgage mess.

This year, Bair has proposed using taxpayer funds to help refinance loans for struggling homeowners. She told legislators at an Oct. 23 hearing that the Treasury could use its $700 billion financial-rescue fund to set terms for mortgage modifications and offer guarantees for loans that meet the standards.

Senators pressed Neel Kashkari, the Treasury official overseeing the Troubled Asset Relief Program, on his department's reaction. “We are looking very hard” on the proposal, he said.

The White House later that month sought to scale back Bair's idea to use as much as $50 billion from the program. Yesterday, an official said Paulson instead is considering a proposal to drive down home-loan rates through purchases of mortgage-backed securities.

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U.K. consumer confidence deteriorated in November to the weakest in at least four years as unemployment jumped and banks curtailed credit, Nationwide Building Society said.

An index of sentiment fell 6 points to 50, the lowest since the survey began in May 2004, Britain’s second-biggest mortgage lender said in a statement today. The reading, taken from a survey of 1,000 people from Oct. 20 to Nov. 16, compares with 83 a year earlier.

Chancellor of the Exchequer Alistair Darling proposed the government’s biggest fiscal stimulus in two decades to combat the recession on Nov. 24, after the survey was completed. The Bank of England will add to that effort by cutting the benchmark interest rate tomorrow to 2 percent, the lowest level since 1951, economists say.

Pessimism increased “against the backdrop of an emerging recession in the U.K. and continued global economic uncertainty,” Fionnuala Earley, chief economist at Nationwide, said in the statement. “It remains to be seen whether the Chancellor’s recent announcement will greatly improve consumer confidence.”

Nationwide’s index of consumers’ attitude on their present situation fell 5 points to 30, and a measure of sentiment toward future expectations declined 7 points to 63. A gauge of willingness to spend rose to 64 from 56.

An index of permanent staff placements by recruitment companies fell to the lowest since at least 1997 in November, the Recruitment & Employment Confederation and Markit said in a report today. The number of U.K. unemployment benefit claimants rose to 980,900 in October, the most since March 2001 free credit report.

Services Shrink

Service industries probably contracted at the fastest pace since at least 1996 in November on an index compiled from a survey of about 700 companies, according to the median forecast of 33 economists in a Bloomberg News survey. Markit and the Chartered Institute of Purchasing & Supply will release that data at 9:30 a.m. in London.

Banks approved just 32,000 mortgages in October, matching the least since 1999. The home-loan shortage helped drive U.K. house prices to the lowest level since January, according to Hometrack Ltd.

Darling pledged on a 25.6 billion-pound ($38 billion) package of tax cuts and spending increases over two years to counter the recession, and said earlier this week he will “almost certainly” need to do more. He has already proposed a guarantee for mortgage-backed securities to boost home loans.

Policy makers reduced the key rate by 1.5 percentage points last month to 3 percent, the lowest level since 1955. The Bank of England may cut it by a further one percentage point tomorrow, according to the median forecast of 60 economists in a Bloomberg News survey.

The Trades Union Congress, which represents about 7 million workers, said today in a statement that the central bank should cut the benchmark rate “to 2 percent or lower.” Former policy maker Willem Buiter predicted yesterday that policy makers will reduce it to 1.5 percent, the lowest ever.

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Manufacturing in the U.S. contracted in November at the fastest pace in 26 years, putting American factories at the forefront of a global industrial slump emanating from the lack of credit.

The Institute for Supply Management’s factory index dropped to 36.2, the lowest level since 1982, the Tempe, Arizona-based group reported today. A reading of 50 is the dividing line between expansion and contraction. Similar measures from China, the U.K., euro area, and Russia all dropped to record lows.

The financial crisis has spiraled into a global economic downturn that’s hurt sales here and abroad, forcing manufacturers to pare production. Economists increasingly are projecting that the U.S. recession will be one of the most severe in the postwar era, putting pressure on policy makers to keep lowering interest rates and boost stimulus plans.

“This downturn in the global economy is probably more synchronized than we have ever seen,” said Jonathan Basile, an economist at credit Suisse Holdings in New York. Policy makers should “open the flood gates” to additional action, he said.

The ISM index was projected to drop to 37, according to the median of 61 economists’ forecasts in a Bloomberg News survey. Estimates ranged from 33.5 to 40.

China’s purchasing managers’ index fell to a seasonally adjusted 38.8 from 44.6 in October, the China Federation of Logistics and Purchasing reported today. An index covering the 15 nations sharing the euro dropped to 35.6, the lowest since Markit Economics began the poll in 1998.

Slump Overseas

VTB Bank Europe’s index covering Russia fell to 39.8, and the U.K.’s Chartered Institute of Purchasing and Supply’s factory index was at 34.4, the least since the survey began in January 1992.

The U.S. ISM’s purchasing managers’ gauge of new orders for factories decreased to 27.9, lowest since 1980, from 32.2 the prior month. The production measure fell to 31.5 from 34.1.

The index of prices paid dropped to 25.5, the lowest level in six decades, from 37. Energy prices have plunged from their peaks in July, when a barrel of crude oil reached $147. Last week oil dropped below $50 a barrel, the lowest price since May 2005, according to the New York Mercantile Exchange.

The employment index decreased to 34.2 from 34.6 in October. The economy has lost 1.2 million jobs so far this year.

Orders from overseas continue to weaken as economies abroad contract same day payday loans. ISM’s export gauge was unchanged at 41.

Worsening Recession

The U.S. economy shrank at a 0.5 percent pace in the third quarter, with business spending on equipment and software declining at a 5.7 percent rate, the biggest drop since the first quarter of 2002. Economists at Goldman Sachs and Morgan Stanley in New York are among those projecting the economy will contract at a 5 percent pace this quarter.

Automakers are among the hardest hit by the slump in demand. Industry figures due tomorrow are forecast to show November auto sales dropped to a 10.5 million annualized rate, the weakest pace since April 1991, a Bloomberg survey shows.

“We are all expecting the year 2009 to be a very low year in terms of demand, not only in the United States, but globally,” Carlos Ghosn, chief executive officer of Nissan Motor Co., said in a Nov. 19 interview on Bloomberg Television. “We may be facing a couple of difficult years, with very low demand.”

Spending Plunge

The credit crisis that intensified in mid-September has worsened the outlook. Companies are cutting payrolls and investments after consumer spending in the third quarter plunged by 3.7 percent, the most in 28 years.

Fleetwood Enterprises Inc., the third-largest U.S. maker of recreational vehicles, last week said its second-quarter net loss widened as tight credit and a weak economy eroded demand for motor homes.

“Consumers are hesitant to spend given current economic circumstances, and at the same time those that wish to buy are having extraordinary difficulty obtaining loans,” Fleetwood Chief Executive Officer Elden Smith said in a statement. “We do not expect market conditions to improve in the near future and we are planning accordingly.”

The company said Nov. 24 it will eliminate about 760 jobs — 13 percent of the 5,700 positions it had at the end of August.

Manufacturers may have cut 80,000 jobs in November, after a loss of 90,000 the month before, according to the median forecast ahead of the Labor Department’s jobs report due Dec. 5. Companies have axed approximately 1.2 million jobs so far this year.

– With reporting by Courtney Dentch in New York. Editor: Carlos Torres

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