Islamabad, Pakistan – Predicting a difficult year ahead for Pakistan, the World Bank has revised the country’s growth projections from 4 percent in June last year to 2 percent for the current fiscal year, citing “precarious economic situation, low foreign exchange reserves and large fiscal and current account deficits” among the primary reasons.
The bank, in its Global Economic Prospects report released on Tuesday, said last year’s catastrophic floods worsened the country’s economy, mainly causing significant damage to agricultural production, which accounts for 23 percent of Pakistan’s gross domestic product (GDP) and provides employment to 37 percent of its working population.
“Policy uncertainty further complicates the economic outlook. The recent floods in Pakistan are estimated to have caused damage equivalent to about 4.8 percent of GDP,” the global bank said.
The projections for Pakistan are in line with the bank’s global outlook report, which forecasts a “sharp, long-lasting slowdown, with global growth declining to 1.7 percent in 2023 from 3.0 percent expected just six months ago”.
The South Asian region will see a slowdown in growth in the coming year, with projections for 2023 remaining at 5.5 percent, while showing minor improvement to 5.8 percent in 2024, it said.
The slowdown in the region is “mainly due to weak growth in Pakistan”, the bank noted.
“Pakistan faces challenging economic conditions, including the repercussions of the recent flooding and continued policy and political uncertainty. As the country implements policy measures to stabilize macroeconomic conditions, inflationary pressures dissipate, and rebuilding begins following the floods, growth is expected to pick up to 3.2 percent in FY2023/24, still below previous projections,” the bank’s report said.
At the end of 2022, Pakistan saw its foreign reserves deplete to a four-year low of $6.7bn, barely enough to cover its import for a month.
The Pakistani rupee, which was valued at 176 rupees against the US dollar in January 2022 ended the year at 226 rupees – a depreciation of 28 percent. Inflation hit record highs with a food security crisis looming over the nation.
The Pakistani government is taking tough economic decisions to ensure the International Monetary Fund (IMF) provides the country with the funds it desperately needs.
Pakistan entered a $6bn IMF bailout programme in 2019, which was increased by another billion the next year. At the peak of the nationwide floods in August last year, the IMF gave Pakistan a $1.17bn package but the next tranche of $1.1bn is still pending due to a deadlock between the lending body and Islamabad over increasing levies on fuel.
Last week, Prime Minister Shehbaz Sharif spoke to IMF chief Kristalina Georgieva over the telephone and said his country is “committed to successfully completing the ongoing IMF programme“.
In a tweet on Saturday, Sharif said he “explained Pakistan’s economic difficulties especially after the devastating floods” to the IMF chief, adding that an “IMF delegation will come to Pakistan soon”.
Pakistan is also seeking monetary support from friendly countries such as Saudi Arabia, China and the United Arab Emirates.
Earlier this week, Pakistan also hosted an international donors’ conference in Geneva where the global community pledged more than $10bn to help it rebuild the flood-ravaged country.
