ISLAMABAD: The International Monetary Fund (IMF) has projected a challenging economic scenario for Pakistan, with consumer price index (CPI)-based inflation anticipated to average 24 percent in the fiscal year 2023-24.
The funds said this high inflation rate was a significant concern, as it disproportionately impacts vulnerable populations and can lead to increased poverty levels.
To address these challenges, the IMF has emphasized the need for the State Bank of Pakistan to maintain a strict monetary policy and adhere to a market-based exchange rate to effectively manage these inflationary pressures.
The IMF’s approval of a $700 million installment under its $3 billion Standby Arrangement (SBA) is part of a broader economic reform program aimed at addressing domestic and external imbalances and serving as a policy framework for financial support from global partners.
Despite these challenges, there are some positive indicators for Pakistan’s economy. The country has shown signs of recovery, with an expected growth rate of 2 percent in FY24. Additionally, the first quarter of FY24 saw a primary surplus of 0.4 percent of GDP, driven by strong revenue performance.
However, the IMF’s projections also indicate that Pakistan’s unemployment rate currently stands at 8 percent, and the poverty level is at 21.9 percent. Contrarily, the World Bank’s projections indicate that the poverty level could rise to 40 percent, highlighting the urgency of addressing these issues.
In response to these challenges, the IMF has stressed the importance of ongoing revenue mobilization, spending discipline, and broad-based fiscal reforms to create space for social and development spending. The IMF has also emphasized the need for structural reforms, including those aimed at improving the business environment, advancing state-owned enterprise reforms, strengthening governance and anti-corruption measures, and building climate resilience. These reforms are seen as essential for boosting job creation and fostering inclusive growth in Pakistan.
In conclusion, while Pakistan’s economy faces significant challenges, there are opportunities for improvement through the implementation of sound macroeconomic policies and the continuation of structural reforms. The IMF’s support and guidance are crucial in navigating these economic challenges and setting the stage for sustainable growth and development in the medium to long term.
