- Economy remains engulfed in various challenges, including a widening current account deficit and rise in debt payments
The World Bank has projected a slowdown in Pakistan's economic growth, which it says will decline to 4% in 2022-23 from 5.7% percent in fiscal year 2020-21.
“In Pakistan, growth is expected to slow from 5.7% in FY2020/21 to 4% in 2022/23 as foreign demand slows significantly and policy support is withdrawn to contain external and fiscal imbalances,” said World Bank in its latest Global Economic Prospects report for June.
In the report, the World Bank also slashed its growth estimate for the global economy to 2.9%, 1.2 percentage points below the January forecast, due to the Russian invasion of Ukraine which has caused a severe downturn.
The projection for Pakistan comes as the economy remains engulfed in various challenges, including a mounting current account deficit amid a spike in the import bill and a rise in debt payments, which has aggravated the foreign exchange reserves' position of the country.
Last week, the Ministry of Planning, Development and Special Initiatives presented a document to the Annual Plan Coordination Committee (APCC), which projected a slowdown in economic growth in the next fiscal year 2022-23 subsequent to the likely resumption of the International Monetary Fund (IMF) programme, fiscal adjustment efforts, addressing worsening trade balance, and mitigating political and economic uncertainty.
“Keeping in view external and local uncertain economic environment, the GDP growth will slightly taper off and is envisaged at 5% for 2022-23 on the back of agriculture (3.9%), manufacturing (7.1%) and services sector (5.1%),” said the government document.
Earlier, Finance Minister Miftah Ismail while addressing a gathering of prominent business personalities on Tuesday stated that the GDP growth would be positive “either four percent, five percent or six percent for the next fiscal year and will also control inflation”.
Meanwhile, the World Bank highlighted that in Pakistan annual headline consumer inflation reached double digits by late last year and accelerated further during 2022.
In response, Pakistan’s central bank has raised rates.
“Some authorities have implemented policies to cushion the impact of high inflation. In Pakistan, for example, the government announced an energy price reduction package in February. However, gasoline and diesel pump prices were recently increased,” said the report.
However, the report identified Pakistan among the economies which have prioritised structural reforms to strengthen economic growth.
“In Pakistan, the government has enhanced its monetary policy framework by strengthening the functional and administrative autonomy of the central bank, prohibiting government borrowing from the central bank, and entrenching price stability as monetary policy’s primary objective,” said the report.