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

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11 months ago

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  • 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.

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It is anticipated that 150 ships would arrive at Gwadar by the year 2045, allowing the port to handle fifty percent of all imports.

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3 days ago

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In an effort to strengthen the port’s economic importance, the Federal Government has made the decision to direct fifty percent of all imports from the public sector to Gwadar Port.

By taking this action, which has the backing of the Special Investment Facilitation Council, the port’s financial situation is going to be improved.

The Cabinet will be presented with a summary of imports through Gwadar by the Ministry of Maritime Affairs, which will take place after Prime Minister Shehbaz Sharif’s recent trip to China.

When the next Cabinet Meeting takes place, Ahsan Iqbal, the Federal Minister for Planning, Development, and Special Initiatives, will examine the Chinese offer for the Karachi to Hyderabad Section of the ML-1 Project and bring it to the Cabinet.

Company preparations for the Shanghai International Import Expo, which will take place in November 2024, are being made by the Board of Investment and the Ministry of Commerce of Pakistan.

One of the most important aspects of the China-Pakistan Economic Corridor is the Gwadar port, which serves as a significant commerce route connecting China, the Middle East, Africa, and Europe. At this time, the Gwadar Port is able to accommodate two huge ships, and by the year 2045, it is anticipated that it would be able to handle up to 150 ships.

By developing the Gwadar Port, regional connectivity would be improved, employment will be created, and international investment will be attracted.

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The price of gold in Pakistan has experienced a significant surge.

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3 days ago

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Gold prices in Pakistan surged significantly on Thursday following two consecutive days of decline, with the price per tola rising by Rs2,000 to reach Rs262,100. This increase was in accordance with the downward trend in international market values.

The All-Pakistan Gems and Jewellers Sarafa Association (APGJSA) reported that the price of 10 grams of 24-karat gold rose by Rs1,714, reaching Rs224,708.

Conversely, the world gold market experienced an upward trajectory. According to the APGJSA, the global price of gold surged to $2,503 per ounce following a $22 gain during the trading session.

The local market experienced a significant decline in silver prices, decreasing from Rs50 to Rs2,900 per tola after a prolonged period.

The local market’s gold prices remain subject to the ever-changing dynamics of the international market, as well as domestic considerations such as currency exchange rates and domestic demand.

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The government has not met the deadline set by the International Monetary Fund (IMF) for the approval of a $7 billion loan.

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4 days ago

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On Tuesday night, there were virtual talks between representatives of the Finance Ministry and the IMF delegation, with the main topics being external finance and income generation.

According to people familiar with the situation, no date has been set for the IMF’s Executive Board to approve the loan despite the ongoing negotiations.

Officials from the Finance Ministry informed the IMF mission about the government’s initiatives to get outside funding during the discussions. Updates on loan rollovers and fresh finance commitments from allies were included in this. According to sources, the IMF has received a schedule, and loan rollovers are expected to be finished by the end of next week.

The $12 billion in debt must be rolled over before the loan can be approved by the Executive Board, according to the IMF mission.

In the virtual discussions, representatives of the Federal Board of Revenue (FBR) conversed with the IMF team over the revenue deficit. The FBR must reach its revenue goals for this month, according to the IMF mission. As a result, the IMF has asked the FBR to submit a thorough strategy outlining how it will close the gap left by the shortfall and guarantee that revenue goals are reached.

Apart from the conversations on outside funding, there are rumors that the Finance Ministry is actively holding talks with commercial banks in order to obtain new funding. According to reports, negotiations are taking place with four distinct sources for commercial loans, which are anticipated to support the government’s overall financial plan.

Finance Minister Muhammad Aurangzeb disclosed on Tuesday that the IMF was in favor of introducing targeted subsidies. He said that qualifying recipients might receive these subsidies through the Benazir Income Support Programme (BISP).

In order to guarantee consistency, the minister announced that this week’s talks with chief ministers will focus on implementing a similar policy across the country. He was having a casual conversation in parliament with the journalists.

In response to queries about outside funding, Aurangzeb revealed a $2 billion deficit and said that talks to close this gap are progressing. He stressed how crucial it is to obtain business loans.

He went on, “At this point, there’s a need to secure an agreement for commercial loans, not exactly their issuance,” emphasizing that debt rollover negotiations are nearing their conclusion and doing well. The minister expected that these developments would shortly be reported to the governments of allied countries by relevant authorities.

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