In contrast to the government’s targeted economic growth of 3.5%, the International Monetary Fund (IMF) has projected Pakistan’s economy to witness a more modest speed of 2.5% in the ongoing fiscal (FY24). The forecast comes after the lender’s executive board on Wednesday approved a 9-month Stand-By Arrangement (SBA).
The IMF had also projected Pakistan’s economy would contract by 0.5% in the previous fiscal year (2022-23), contrary to the government’s announcement in the Economic Survey that GDP grew 0.3%.
Meanwhile, sharing data of selected economic indicators, the Washington-based lender said Pakistan’s unemployment rate would reduce from 8.5% in FY23 to 8% in the ongoing fiscal year.
| Pakistan: Selected Economic Indicators, FY2022–FY2024 | |
|---|---|
| Population: 231.6 million (2022/23) | Per capita GDP: US$1,642 (FY2022) |
| Quota: SDR 2,031 million | Poverty rate: 21.9 percent |
| Main exports: Textiles (US$19.3 billion, FY2022) (national line; FY2019) | |
| Key export markets: European Union, United States, UAE |
| FY2022 | FY23 (projected) | FY24 (projected) | |
|---|---|---|---|
| Real GDP at factor cost | 6.1 | -0.5 | 2.5 |
| Unemployment rate | 6.2 | 8.5 | 8 |
| Consumer prices, period average | 12.1 | 29.6 | 25.9 |
| Revenue and grants | 12.1 | 11.4 | 12.3 |
| Expenditure | 20 | 18.9 | 19.8 |
| Budget balance, including grants | -7.8 | -7.6 | -7.5 |
| Primary balance, excluding grants | -3.1 | -1 | 0.4 |
| Underlying primary balance (excluding grants) | -2.3 | -0.8 | 0.4 |
| Total general government debt excl. IMF obligations | 74 | 74.9 | 68.4 |
| External general government debt | 27.4 | 31.1 | 28.4 |
| Domestic general government debt | 46.6 | 43.8 | 40 |
| General government debt incl. IMF obligations | 76.1 | 77.4 | 70.9 |
| General government and government guaranteed debt incl. IMF | 80.6 | 81.8 | 74.9 |
| Current account balance | -4.6 | -1.2 | -1.8 |
| Foreign direct investment | 0.5 | 0.4 | 0.2 |
| Gross reserves (millions of U.S. dollars) | 9,821 | 4,056 | 8,982 |
| Months of next year's imports of goods and services | 1.9 | 0.7 | 1.4 |
| Total external debt | 32.1 | 36.4 | 37.3 |
Moreover, inflation, a key concern for policymakers, is also projected to decline from an average of 29.6% in FY23 to 25.9% in FY24. The government, in its budget announcement, is targeting inflation at 21%.
At the end of the fiscal year, the IMF expects inflation to slow down to around 16%.
In addition, the lender also projected a slight decrease in the government’s budget deficit from 7.6% of the GDP in FY23 to 7.5% of the GDP in FY24.
However, the IMF also expects government expenditure to increase from 18.9% of GDP to 19.8%.
It also said that foreign direct investment would decrease drastically from 0.4% to 0.2% of GDP.
In terms of foreign exchange reserves held by the State Bank of Pakistan (SBP), the IMF expects the level to be near $9 billion in FY24, a massive jump from $4.06 billion at the end of FY23.
The IMF also projects a higher current account deficit at 1.8% of GDP, compared to 1.2% in the previous fiscal year.
Background
The projections were published by the IMF on its website after its Executive Board approved on Wednesday a 9-month Stand-By Arrangement (SBA) for Pakistan for an amount of SDR2,250 million (about $3 billion, or 111% of quota).
The arrangement comes at a challenging economic juncture for Pakistan facing a difficult external environment, devastating floods, and policy missteps that led to large fiscal and external deficits, rising inflation, and eroded reserve buffers in FY23, the IMF said.
The approval allows for an immediate disbursement of SDR894 million (or about $1.2 billion). The remaining amount will be phased over the program’s duration, subject to two quarterly reviews — in November and February, informed Finance Minister Ishaq Dar on Thursday.