Business

IMF projects Pakistan’s GDP growth to stand at 2.5% in current fiscal year

Published

1 year ago

Farwa

IMF says stagflation and high unemployment rate to persist.
Data shows unemployment rate increased in last two fiscals.
IMF projects that GDP growth rate may rise to 5% by FY2028.

ISLAMABAD: The International Monetary Fund (IMF) has warned that stagflation in the country would persist and also lowered the GDP growth projection for the current fiscal year 2023-24, reported The News Monday.

The global lender, in its World Economic Outlook for 2023-24, estimated that the GDP growth rate of Pakistan would stand at 2.5% for the current fiscal compared to the government’s 3.5% target.

Apart from the stagflation, the IMF has also warned that the unemployment rate will remain elevated at 8% in FY2024 against 8.5% in FY2023. The unemployment rate stood at 6.2% in FY2022. The IMF’s data shows that the unemployment rate has increased in the last two fiscals.

The report also projected that the GDP growth rate turned into -0.5% in the last financial year 2022-23 under the PDM-led regime but then the government gave a provisional growth rate of 0.29% for the previous fiscal year. The IMF has projected that the country’s GDP growth rate might rise to 5% by FY2028.

Under the IMF programme, the caretaker government will release the quarterly GDP growth figures under the $3 billion Stand-By Agreement (SBA) by the end of next month, so the finalised GDP growth figure would be turned into negative for the last financial year.

However, the CPI-based inflation-related projection would be elevated and estimated at 23.6% against the government’s projection of 21.9% for the ongoing financial year.

A low growth rate paired up with higher inflation leads to stagflation which would in turn increase poverty and unemployment, raising fears that the vulnerable segments of society might plunge into the trap of severe poverty.

The CPI-based inflation was lowered by the IMF’s World Economic Outlook; it is projected at 23.6% for the current fiscal against an earlier projection of 25.9% by the IMF staff in a report released last July.

The most worrying indicators for Pakistan’s economy will be related to the persistence of the current account deficit in the range of -1.8% of GDP for the current financial year 2023-24 against -0.7% of GDP in financial year 2022-23.

World economy resilient to shocks but ‘limping’

Meanwhile, IMF kept its 2023 global growth forecast unchanged on Tuesday but warned that the economy is “limping along” as inflation remains high and the outlooks for China and Germany were downgraded.

The IMF’s updated World Economic Outlook still sees growth of 3.0% for this year but it cut its forecast for 2024 to 2.9%, down 0.1 percentage points from its July report.

“The economy continues to recover from the pandemic and Russia’s invasion of Ukraine, showing remarkable resilience,” said the IMF’s chief economist, Pierre-Olivier Gourinchas.

“Yet growth remains slow and uneven. The global economy is limping along, not sprinting,” he said at a news conference during the institution´s annual meetings in Marrakesh, Morocco.

Inflation, which has fallen sharply since last year, is predicted to remain elevated at 6.9% this year, up slightly from July, and 5.8% in 2024, up 0.6 percentage points. Central banks have raised interest rates sharply in efforts to contain inflation.

The move could have knock-on effects on growth, but the IMF warned central banks against easing the monetary tightening too soon, adding that it still expects the global economy to have a “soft landing” — a slowdown that avoids recession.

“The news on inflation is encouraging, but we’re not quite there yet,” Gourinchas said.

Business

SFD and Pakistan Sign Two Deals Totaling $1.61BLN

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1 day ago

Farwa

Two agreements totaling $1.61 billion have been inked by Pakistan and the Saudi Fund for Development to improve their bilateral economic cooperation.

Business

Saudi Arabia and Pakistan sign an MOU to strengthen their auditing industry collaboration.

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1 day ago

Farwa

A spokesperson for the office of the Auditor-General of Pakistan (AGP) announced on Monday that the two countries have signed a Memorandum of Understanding (MoU) to strengthen cooperation in public sector auditing through improved cooperation between audit institutions of both countries, as well as training programs and the exchange of trainers.

This comes as a group from Saudi Arabia’s General Court of Audit (GCA), headed by GCA President Dr. Hussam bin Abdulmohsen Alangari, arrived in Pakistan on Sunday for a four-day visit.

The agreement was signed during AGP Muhammad Ajmal Gondal’s meeting with the Saudi delegates, aiming to strengthen audit cooperation, enhance knowledge-sharing, and improve governance, transparency and accountability in government spending.

Public relations officer Muhammad Raza Irfan of the AGP’s office told Arab News that the deal will further advance bilateral collaboration between Saudi Arabia and Pakistan in addition to enhancing professional ties between the two nations’ auditing institutions.

In a statement released from his office, AGP Gondal was cited as saying, “This collaboration marks a significant step toward fostering international cooperation in auditing.”

“The exchange of ideas and methodologies will undoubtedly strengthen our capacity to meet emerging challenges and set new benchmarks for public accountability.”

Discussions at Monday’s meeting focused on fostering closer ties between the Supreme Audit Institutions (SAIs) of Pakistan and Saudi Arabia, sharing innovative audit methodologies, and planning collaborative initiatives for the future, according to the AGP office.

The two parties decided to increase their knowledge of theme, environmental, and impact audits as well as to exchange best practices in audit standards, performance audits, and citizen participation audits.

The statement added, “It also agreed to exchange trainers, address new auditing challenges, plan cooperative audits, including a performance audit on the oil and gas sector in 2025, and work together on training programs.”

Both sides reaffirmed their shared commitment to promoting transparency, accountability and excellence in public sector auditing.

Business

The government chooses to continue the PIA privatization process.

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1 day ago

Farwa

The Pakistan International Airlines (PIA) privatization process will be restarted by the federal government, and expressions of interest would be requested within the month. Officials stated that the Prime Minister’s Committee on Privatization will convene to make the final decision.

Usman Bajwa, the secretary of the Privatization Commission, gave a briefing on the updated procedure to the National Assembly Standing Committee on Privatization. Additionally, he disclosed that airlines other than PIA are now able to compete with regional carriers thanks to IMF-approved aircraft tax concessions.

Farooq Sattar, the chairman of the privatization committee, underlined the importance of giving PIA workers at least five years of job security. Employee protection will continue to be a top priority and will be resolved prior to bidding, the Privatization Commission promised.

PIA’s liabilities totaling Rs650 billion have already been assumed by the government, and an additional Rs45 billion in outstanding debts must be paid before the privatization process can begin. As of the now, PIA has assets around Rs155 billion and liabilities worth Rs200 billion. It will be necessary for the new buyer to expand the fleet by 15 to 20 aircraft.

Additionally, the Privatization Committee has sought a timeline for the privatization of Faisalabad, Gujranwala, and Islamabad Electric Supply Companies. Officials stated that after the appointment of a financial advisor, the privatization process for these companies will accelerate.