LAHORE MIRROR – The International Monetary Fund (IMF) has projected that Pakistan’s growth is expected to reach a potential of 5% in the medium term, assuming sustained policy and reform implementation and adequate financial support.
Last week, the IMF’s executive board approved a $3 billion nine-month standby arrangement (SBA) for Pakistan to support its economic stabilisation programme. The approved bailout package amounts to about $3 billion, or 111% of Pakistan’s quota.
According to a country report released by the IMF, Pakistan’s growth is anticipated to moderately pick up in the current fiscal year and reach 2.5%. The report acknowledges the boost from post-flood recovery, particularly in the agriculture and textile sectors, but highlights that the unwinding of import management and external challenges will limit the recovery and require tight macro policies.
Regarding inflation, the IMF expects headline inflation to decrease from June onwards due to base effects and reduced contributions from food items. However, price pressures are projected to remain elevated, and average headline inflation is expected to remain above 25% in FY24, with a decline below 20% only in FY24Q4. Core inflation is predicted to recede gradually in FY24 due to elevated inflation expectations and necessary policy tightening.
The IMF notes that Pakistan’s fiscal space has been severely depleted, and substantial vulnerabilities persist. It recommends maintaining small primary surpluses in the coming years and making strong revenue efforts to create space for priority social and development spending while strengthening debt sustainability. Without such efforts, the fiscal and debt position could undermine macroeconomic stability.
The IMF anticipates the current account deficit to increase to around $6.5 billion in the current fiscal year, driven by the recovery in exports and imports. It emphasizes the need for the deficit to remain moderate at around 2% of GDP over the medium term, in line with projected official and capital flows and efforts to rebuild reserves.
The IMF also highlights that risks to debt sustainability have become more acute due to limited external financing and large gross financing needs. This poses challenges to achieving sustainability in the coming years.
Overall, the IMF’s report emphasizes the importance of sustained reforms, financial support, and policy implementation for Pakistan’s economic growth and stability.
