KARACHI: Despite some improvement in macroeconomic indicators, economy continues to grapple with the structural bottlenecks, State of Pakistan’s Economy Report for the first half of FY24, released on Tuesday said.

According to the SBP report, the major issues include limited savings, low investments in physical and human capital, weak productivity, stagnant exports, narrow tax base, and inefficiencies in PSEs.

Additionally, political uncertainty exacerbates the situation through inconsistency in economic policies, weak governance and public administration, hindering investment and thus economic development. These underscore the need for policy reforms to ensure sustainable development over the medium to long-term, the report said.

The report included a Special Chapter that analyzes long-term trends in inflation and its determinants in Pakistan. The chapter also sheds light on policy and structural factors influencing inflation including monetary policy framework, fiscal and debt policy, trade openness, agricultural efficiency, productivity and demographic trends. The chapter concludes that reducing political and policy uncertainties and more fiscal consolidation can help bring inflation down at a faster pace in the short run.

The chapter also emphasizes on addressing longstanding structural issues to achieve low and stable inflation over the medium term, without overburdening monetary policy and the consequent high economic costs.

Copyright Business Recorder, 2024