The International Monetary Fund (IMF), on Tuesday, cut its growth forecast for Pakistan in 2023 to 0.5% from its earlier estimate of 3.5% made in October 2022, as it predicted the country’s inflation rate to reach 27.1% and unemployment to hit 7% in the current fiscal year.
The IMF shared Pakistan’s economic outlook alongside other member states, highlighting the country’s growth forecast, inflation rate, and the unemployment rate for 2023.
“Tentative signs in early 2023 that the world economy could achieve a soft landing — with inflation coming down and growth steady — have receded amid stubbornly high inflation and recent financial sector turmoil,” the report said.
The report added that “debt levels remained high in much of the world, limiting the ability of fiscal policymakers to respond to new challenges.”
Pakistan’s GDP stood at 6% in 2022, and the IMF expects it to grow once again in 2024 to 3.5%.
The revised forecast came as Pakistan’s government seeks external financing to help bolster its declining foreign exchange reserves. The country has limited imports in recent months due to a dollar liquidity crunch caused by negotiations with the IMF for about a $1bn tranche under a $7bn loan program that has failed to reach a staff-level agreement since last September.
Pakistan’s Finance Minister, Ishaq Dar, canceled his trip to the US last week to attend the spring meetings of the IMF and World Bank. However, he has announced that he will attend important bilateral and multilateral meetings virtually and send a Pakistani delegation to Washington.
The IMF’s revised growth forecast for Pakistan further highlights the need for urgent economic reform and sustainable policies to address the country’s financial challenges.
Global lenders slash Pakistan’s growth forecast
Pakistan’s economic outlook continues to be grim as lenders revised their growth forecasts for the country.
The World Bank has projected that approximately four million people will fall below the lower-middle-income poverty line due to economic growth plummeting to just 0.4%, significantly lower than the budgeted target of 5%.
Similarly, the Asian Development Bank (ADB) has revised Pakistan’s growth forecast to 0.6%, down from 6% in the previous year.
The World Bank also revised Pakistan’s GDP growth rate estimate to 0.4%, down from the previous estimate of 2% in January.
The reasons cited for the decline in economic growth, by both banks, include the ongoing political crisis, flood-related economic losses, foreign exchange challenges, tighter macroeconomic policies at home, and a challenging external environment.