The World Bank stated on Tuesday that it anticipated the nation’s economic activity to “remain subdued” and that the GDP would expand by 1.8% during the current fiscal year.
“Pakistan Development Update: Fiscal Impact of Federal State-Owned Enterprises,” the most recent study from the World Bank, stated that “Pakistan is expected to continue facing foreign exchange liquidity issues due to the persistent trade deficit and limited access to external financing.”
The statement read, “Reserves are projected to remain low even with the recent successful completion of the International Monetary Fund’s (IMF) Stand-By Arrangement (SBA) and continued rollovers.”
The Bank issued a warning, stating that in addition to strict macroeconomic policies that are suppressing overall consumption and investment, import management measures are predicted to continue upsetting the local supply chain.
It stated that uncertainty is anticipated to persist and have an impact on growth and confidence in the absence of a genuine and ambitious program for economic transformation.
As a result, it stated, economic activity is anticipated to remain muted, with real GDP growth of 1.8 percent in fiscal year (FY) 2024. As confidence increased, the bank projected that production growth would rebound at an average rate of 2.5 percent over the following two years, albeit below potential in the longer run.
Additionally, the report stated that increased domestic energy prices are expected to keep inflation elevated at 26 percent in FY24. Inflation is anticipated to reduce over the medium term due to large base effects and lower forecast global commodity prices.
In reference to the current account deficit (CAD), the report stated that it was anticipated to stay low at 0.7 percent of GDP in the current fiscal year and to shrink to 0.6 percent of GDP in the next two years as a result of decreased domestic demand and ongoing import control efforts.
The report highlighted the several issues that presented dangers to the economic outlook of the nation. It also said that Pakistan, with a tax-to-GDP ratio of 10%, heavily relied on domestic borrowing for fiscal financing, therefore exposing the banking sector to risks.
