The latest study from the Asian Development Bank (ADB) paints a gloomy picture for Pakistan’s economy and warns that maintaining an economic adjustment programme through April 2024 is essential for reestablishing stability and a slow but steady recovery of GDP.
Pakistan’s development slowed as expansionary fiscal and monetary policies reached their limits, according to the Asian Development Outlook for September 2023, which was released on Wednesday. The rupee fell in value, foreign exchange reserves went down, and inflation shot up significantly.
The Asian Development Bank predicted moderate GDP growth of 1.9% for the fiscal year 2024, with price pressures continuing elevated. The forecasts made six months ago were slightly higher than this number.
However, stabilisation efforts will likely continue to dampen demand growth, thus uncertainty is likely to persist. The Asian Development Bank forecasts growth in private consumption and private investment of 3%–5% annually, with inflation remaining in the double digits.
The analysis concludes that if the conflict between Russia and Ukraine escalates, it might disrupt supply chains and put more pressure on global financial conditions.
Moreover, the research warns that, with general elections scheduled for the next months, political uncertainty poses a threat to the implementation of reforms towards growth stabilisation, restoration of investor confidence, and sustainable debt.
The ABD emphasises the importance of continued funding from bilateral and multilateral partners for maintaining a stable exchange rate, boosting market confidence, and building up reserves.
The ABD states that stabilising the economy and rebuilding buffers for domestic and external balances are the primary goals of the economic adjustment programme, the success of which will have a significant impact on the near-term outlook for the economy. These might lay the groundwork for a programme in the incoming administration.
Reforms to state-owned businesses, the energy sector, climate change preparedness, and the financial sector are just some of the areas targeted by the adjustment program’s structural reforms.
The ADB research states that the trust level would increase with the implementation of this project and the possibility of peaceful general elections, and that import constraints would be relaxed to stimulate investment.
The ADB predicts that increased agricultural output will result from the combination of favourable weather and the government’s relief package of free seeds, fertiliser, and subsidised credit. Economies stand to gain from a rise in exports as farm output recovers and crucial imported supplies become more readily available to businesses.
The ADB acknowledges that there are downside risks from global price shocks and slower global growth, but that imports are projected to expand significantly faster due to pent-up demand.
