he International Monetary Fund has said that Pakistan's economic situation was worsening and faces a return to double-digit inflation as the government prints money to finance its deficit.

In a mission report, the IMF said yesterday, Islamabad urgently needed to address deep problems in its energy sector, including costly subsidies and poor distribution, while boosting growth to meet a rapidly growing population. The IMF said, Pakistan faces a challenging economic outlook.

The country's GDP growth in 2012-13 is projected to be in the 3-3.5 percent range, which needs to accelerate in order to absorb the growing labour force. The IMF warned that allowing inflation to rise, is hurting the population at large.