- Depending on a fast return to stability twinned with robust macroeconomic and structural reforms, country can bounce back: Asian Development Bank
Pakistan’s economic growth is expected to slow significantly to 0.6% in FY23 from 6% in the previous fiscal year, the Asian Development Bank (ADB) said on Tuesday in a new report. This comes as the economy struggles to recover from last year’s devastating floods, ballooning inflation, a current account deficit, and an ongoing foreign exchange crisis.
“Pakistan’s economy continues to face strong headwinds while last year’s catastrophic floods have exacerbated the economic and financial challenges,” said ADB Country Director for Pakistan Yong Ye.
But he added that “with a history of resilience in the face of adversity and depending on a fast return to stability twinned with robust macroeconomic and structural reforms, Pakistan can bounce back.”
He also said the ADB is committed to continuing to support Pakistan’s economic recovery and development plans.
According to the Asian Development Outlook (ADO) April 2023 report, Pakistan’s growth is forecasted to rise to 2% in FY2024, if there is resumption of macroeconomic stability, implementation of reforms, post-flood recovery, and improving external conditions.
The outlook notes that climate change poses a grave challenge to Pakistan’s economic, social, and environmental development.
As per the Global Climate Risk Index, Pakistan has ranked among the 10 most vulnerable nations worldwide in the past two decades.
The report states that in FY2023, industrial growth is forecast to continue decelerating, which reflects fiscal and monetary tightening, a significant depreciation of the local currency, and higher domestic oil and electricity prices.
“The fiscal deficit is projected to narrow slightly to the equivalent of 6.9% of GDP in FY2023. If the International Monetary Fund (IMF) program remains on track, the deficit will likely continue to shrink in the medium term as measures to mobilize more revenues—such as harmonizing general sales taxes—gain momentum,” said the report.
Pakistan’s government remains busy wooing the IMF to revive the stalled Extended Fund Facility (EFF) programme, which if approved by its board would release a funding tranche of over $1 billion.
The ADO report also said that the average inflation is projected to more than double from 12.2% in FY2022 to 27.5% this fiscal year.
According to the study, headline consumer inflation jumped to 25.4% in the first 7 months of the fiscal year on higher domestic energy prices, a weaker currency, flood-related disruptions to supply, and restraint on imports caused by the balance of payment crisis.
“As a net importer of oil and gas, Pakistan will continue experiencing strong inflationary pressures for the rest of FY2023,” it said.
Last week, ADB dispatched its Accountability Mission to ascertain eligibility of complaints about four key projects in Pakistan including Peshawar Sustainable Bus Rapid Transport Corridor Project, well informed sources told Business Recorder.