The IMF has lowered Pakistan’s GDP growth forecast to 3 per cent from 3.2 per cent, which is worrying news for a country with a rapidly expanding population, according to an article in the Pakistani media.
The large-scale manufacturing sector actually contracted by 1.25 per cent in the first five months of the ongoing fiscal, and exports appear to be slowing down. Aside from foreign loans and other external assistance, the only other thing Pakistan has been able to count on to keep rising rapidly is remittances, which soared to an all-time high of $8.8 billion in the first quarter of FY2025, the article in The News International said.
An economy so heavily dependent on the goodwill of foreign creditors and the salaries of expats is unlikely to attain the sustainable growth that it needs. This objective is only further complicated by the fact that the strings attached to continued IMF assistance require more taxes, fewer subsidies and concessions, and tighter budgets. This only raises the imperative for the government to make the tough economic reforms necessary to attract more foreign investment and shed the burden of unproductive state-owned enterprises.
While stabilisation ought to be celebrated, a stable economy without much growth, investment or competitive companies will not remain stable for long, the article pointed out.
In a fiscal half that has seen a turnaround in the current account, a more stable and stronger rupee, declining inflation, and much lower policy rates, disappointing growth remains the main blot on the economic picture.
And while the current account surplus, policy rate cuts, and stabilising prices certainly are, they are all highly contingent on all the external support the country has received, mainly in the form of the IMF bailout last summer. In fact, the current account surplus coincided with the UAE’s decision to roll over $2 billion in deposits with the State Bank of Pakistan for another year. As such, it is hard to give too much credit to domestic economic policy for this decision, the article added.
