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In contrast to the government’s targeted economic growth of 3.5%, the International Monetary Fund (IMF) has projected Pakistan’s economy to witness a more modest speed of 2.5% in the ongoing fiscal (FY24). The forecast comes after the lender’s executive board on Wednesday approved a 9-month Stand-By Arrangement (SBA).

The IMF had also projected Pakistan’s economy would contract by 0.5% in the previous fiscal year (2022-23), contrary to the government’s announcement in the Economic Survey that GDP grew 0.3%.

Meanwhile, sharing data of selected economic indicators, the Washington-based lender said Pakistan’s unemployment rate would reduce from 8.5% in FY23 to 8% in the ongoing fiscal year.

Pakistan: Selected Economic Indicators, FY2022–FY2024
Population: 231.6 million (2022/23) Per capita GDP: US$1,642 (FY2022)
Quota: SDR 2,031 million Poverty rate: 21.9 percent
Main exports: Textiles (US$19.3 billion, FY2022) (national line; FY2019)
Key export markets: European Union, United States, UAE
FY2022 FY23 (projected) FY24 (projected)
Real GDP at factor cost 6.1 -0.5 2.5
Unemployment rate 6.2 8.5 8
Consumer prices, period average 12.1 29.6 25.9
Revenue and grants 12.1 11.4 12.3
Expenditure 20 18.9 19.8
Budget balance, including grants -7.8 -7.6 -7.5
Primary balance, excluding grants -3.1 -1 0.4
Underlying primary balance (excluding grants) -2.3 -0.8 0.4
Total general government debt excl. IMF obligations 74 74.9 68.4
External general government debt 27.4 31.1 28.4
Domestic general government debt 46.6 43.8 40
General government debt incl. IMF obligations 76.1 77.4 70.9
General government and government guaranteed debt incl. IMF 80.6 81.8 74.9
Current account balance -4.6 -1.2 -1.8
Foreign direct investment 0.5 0.4 0.2
Gross reserves (millions of U.S. dollars) 9,821 4,056 8,982
Months of next year's imports of goods and services 1.9 0.7 1.4
Total external debt 32.1 36.4 37.3

Moreover, inflation, a key concern for policymakers, is also projected to decline from an average of 29.6% in FY23 to 25.9% in FY24. The government, in its budget announcement, is targeting inflation at 21%.

At the end of the fiscal year, the IMF expects inflation to slow down to around 16%.

In addition, the lender also projected a slight decrease in the government’s budget deficit from 7.6% of the GDP in FY23 to 7.5% of the GDP in FY24.

However, the IMF also expects government expenditure to increase from 18.9% of GDP to 19.8%.

It also said that foreign direct investment would decrease drastically from 0.4% to 0.2% of GDP.

In terms of foreign exchange reserves held by the State Bank of Pakistan (SBP), the IMF expects the level to be near $9 billion in FY24, a massive jump from $4.06 billion at the end of FY23.

The IMF also projects a higher current account deficit at 1.8% of GDP, compared to 1.2% in the previous fiscal year.

Background

The projections were published by the IMF on its website after its Executive Board approved on Wednesday a 9-month Stand-By Arrangement (SBA) for Pakistan for an amount of SDR2,250 million (about $3 billion, or 111% of quota).

The arrangement comes at a challenging economic juncture for Pakistan facing a difficult external environment, devastating floods, and policy missteps that led to large fiscal and external deficits, rising inflation, and eroded reserve buffers in FY23, the IMF said.

The approval allows for an immediate disbursement of SDR894 million (or about $1.2 billion). The remaining amount will be phased over the program’s duration, subject to two quarterly reviews — in November and February, informed Finance Minister Ishaq Dar on Thursday.

Comments

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Manzoor Jul 13, 2023 05:50pm
Electric shock therapy not working...patient is in critical condition...the "Compromised" have comprised the future of Pakistan to save their skins...what a pity...no shame...
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KU Jul 13, 2023 07:03pm
And the shameless with their court jesters are still celebrating the loan as an achievement. More of the same is in store for everyone if these leaders form a government after elections. Why must the people and country continue to suffer them? No one in sight to save us this time!
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FH Jul 13, 2023 09:46pm
Pakistan is paying heavy pension amounts to the Govt retired staff and they are enjoying the high standard lives just on pensions and the burden are increasing every year with very high percentage. IMF should impose the condition on Pakistan Govt that minimum amount of pension should be release to the pensioners as the country cannot afford to distribute people tax money on the pensioners and the pensionary are enjoying high standard lives and other people are suffering just because of higher taxes.
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Asim Jul 13, 2023 11:34pm
@FH, also reduce defence budget 1.8 trillion horrible figure
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bonce richard Jul 14, 2023 01:35am
@FH, Only an honest and respectable army getting good money from us. They have billions of dollars in property within the country and abroad. Who are suffering poor people as well as taxpayers, not businessmen?
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Fazeel Siddiqui (Overseas Pakistani) Jul 15, 2023 04:14pm
Perhaps an student of Darknomics adjusted numbers in report as EB just wanted the SBA bailout to get it passed. Projections as unreal as they were in 7/8 review of EFF.
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Awami Jul 15, 2023 09:41pm
@FH, Govt. Retired workers are getting good pension amounts not "great" amounts. Many talented can get much better in private sector. Due to fair retirements such people get in to Govt. service due to better pensions. If that benefit is reduced no capable people will accept Govt. Job. Lack of good ,able staff governance will go down very fast.
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