File photo. Saul Loeb—AFP
The International Monetary Fund (IMF) on Tuesday reduced Pakistan’s economic growth rate forecast for the ongoing fiscal year from 3.5 percent to 0.5 percent, while also warning of entrenched inflation that will continue into the next fiscal year.
The reduction to Pakistan’s growth forecast reflects similar projections from the World Bank and Asian Development Bank, which last week predicted growth of 0.4 percent and 0.6 percent, respectively. They also projected inflation at 29.5 percent and 27.5 percent, respectively, for the ongoing fiscal year.
The IMF’s World Economic Outlook report indicated that inflation in Pakistan—already at a 50-year high—would likely remain elevated for at least one more year, as it raised its average inflation rate projection to 27 percent for the ongoing fiscal year compared to the 19.9 percent it had projected 8 months ago. The next fiscal year of 2023-24, it said, would see average inflation of 21.9 percent. This suggests that whichever government forms after elections due in October would be unlikely to provide any substantive relief to a public overburdened by price hikes.
Pakistan’s inflation rate, according to the report, is not reflected in global trends. The lender stated that global headline inflation was on the decline, attributing it to falling fuel and energy prices. However, Pakistan’s recent currency devaluation, coupled with the imposition of new taxes and hikes to utility prices and food items ensure that its population would remain under stress through 2024.
On the unemployment rate, the IMF said it had risen to 7 percent in Pakistan this year compared to 6.2 percent last year. It said this was expected to slightly decline to 6.8 percent next year, adding that economic growth would also inch up to 3.5 percent.
The IMF outlook projected Pakistan’s current account deficit (CAD) to decline to 2.3 percent of GDP during this year, down from 4.6 percent a year ago. Next year, it said, the CAD would slightly increase to 2.4 percent.
On global economic output, the IMF said it would likely hit 2.8 percent in the current fiscal compared to earlier projections of 2.9 percent. This, it said, would settle at 3 percent within five years—the lowest medium-term forecast in decades.