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People stand by a makeshift stall selling imported general items in a market in Karachi, Pakistan (Image: Reuters)
Pakistan’s economy suffers as IMF lowers growth rate projection to 0.5%, predicts soaring inflation and unemployment
The International Monetary Fund (IMF) on Tuesday reduced Pakistan’s GDP growth rate projection for the current fiscal year to 0.5% from 2% due to the country’s bleak economic outlook.
The IMF said that retail inflation in Pakistan will go beyond 27% and unemployment rate would soar to 7%.
However, the global lender’s predictions published in the latest World Economic Outlook (WEO) report for 2024 could bring some respite to Islamabad as the country’s economic growth is expected to improve to 3.5% in fiscal 2024.
Meanwhile, inflation is predicted to remain high at 22%, and the unemployment rate is estimated to slightly decrease to 6.8%.
The forecast said that inflation, measured by the Consumer Price Index (CPI), would be recorded at around 27.1% in FY23. The current account deficit (CAD) was forecast to clock in at 2.3% and 2.4% in FY23 and FY24, respectively, the forecast said.
Earlier the World Bank and Asian Development Bank also lowered Pakistan’s growth rate projections to 0.4% and 0.6%, respectively.
Meanwhile, the IMF said that the economy of neighbours India and Bangladesh will grow at 4.9% and 5.5% respectively.
Pakistan’s CAD is expected to decrease this fiscal year compared to last year, but at the expense of slower growth, high inflation, and more unemployment. However, it is expected to increase slightly in the next fiscal year.
The CAD rate would decline to 2.3% of GDP during this fiscal year from 4.6% a year ago, according to the WEO document and slightly rise to 2.4% next year.
Pakistan’s economy has been facing significant challenges, marked by a decades-high inflation rate and a number of companies scaling down or shutting operations. The uncertainty surrounding the delay in the release of final tranche of the IMF bailout is exacerbating the situation.
The slowdown in global economy along with the devastating 2022 floods has also added to Pakistan’s woes. The country is also witnessing political turmoil and a fresh wave of terrorism affecting almost every province.
Meanwhile, Pakistan’s private sector has also complained of facing severe stress due to withdrawal of subsidised electricity, restricted imports, all-time high-interest rates and the rupee’s devaluation against the US dollar.
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