ISLAMABAD: The International Monetary Fund (IMF) has downgraded Pakistan’s GDP growth forecast to 4% against the government’s target of 4.8%. Though the Fund’s first assessment is out on Pak economy confirming its last fiscal year forecast of 3.9%. Its World Economic Outlook listed many challenges still faced by its economy.
Finance Minister Shaukat Tarin just left for Washington to meet IMF officials, hoping to set its record straight with the fund, though USA is not in a good mood with Pakistan and it seems difficult to get more funds from IMF easily.
His team tried to bridge all the fiscal gaps with the Fund staff on teleconference in last ten days. Though remaining terms would be discussed in Washington now.
IMF had suggested around RS 225 billion tax measures to cover the financing gaps. Electricity rates to go up and the dollar value also to reset in favor of dollar.
Earlier World Bank has also down-graded Pakistan’s GDP growth projection by highlighting certain downside risks, likely to come down to 3.4 per cent during the current fiscal year against 3.9pc of last fiscal year. However, it pointed out, the growth rate can hit the 4pc mark in the next fiscal year (2023) if the government implemented key structural reforms.
“In Pakistan, growth is expected to ease a little to 3.4pc in fiscal year 2021-22, as fiscal and monetary measures are expected to unwind,” said the World Bank.
The GDP growth is expected to ease to 3.4 percent in the current fiscal year, as both expansionary fiscal and monetary measures are expected to unwind. For fiscal year 2022-23, growth will pick up again to reach four percent as major structural reforms are implemented that are expected to strengthen the economy’s overall competitiveness. The economic growth is expected to ease in fiscal year 2022 before strengthening again in fiscal year 2023.
The 39-month IMF Extended Fund Facility (EFF) programme is likely to resume in fiscal year 2022 with the 6th Review mission expected in October 2021. Key reforms include domestic revenue mobilisation, the reduction of power sector arrears, electricity subsidy reform and more central bank operational autonomy, all of which are expected to strengthen long-term growth.
Output growth is therefore projected to ease to 3.4 percent in fiscal year 2022, but strengthen thereafter to four percent in fiscal year 2023 with the implementation of key structural reforms, particularly those aimed at sustaining macroeconomic stability, increasing competitiveness and improving financial viability of the energy sector. Inflation is projected to edge up in fiscal year 2022 with expected domestic energy tariff hikes and higher oil and commodity prices before moderating in fiscal year 2023.
Transport inflation in Pakistan was also above headline during May-July and only came down relative to headline inflation in August. Food prices have also been rising faster than average prices. In Bhutan, Nepal, Pakistan, and Sri Lanka, food price inflation is higher than headline inflation in at least two of the three most recent months.
Poverty is expected to continue declining, reaching four percent by fiscal year 2023.
