The International Monetary Fund (IMF) has kept Pakistan’s economic growth forecast unchanged at 2% but increased the inflation projection to nearly 25% for this fiscal year. This adjustment comes as the country undergoes another round of increases in utility and fuel prices.
In its World Economic Outlook report released on the sidelines of the spring meetings, the global lender also revised the current account deficit downward to 1.1% of gross domestic product (GDP) or below $4 billion.
The IMF has also upward revised the inflation forecast for the next fiscal year 2024-25 but did not change the economic growth projection.
During the second quarter of this fiscal year, Pakistan’s economy grew by just 1% due to continued restrictions on imports, tight monetary policy, and increasing cost of doing business that is taking goods out of the reach of the majority of the people.
The Pakistan Bureau of Statistics reported on Tuesday that the large-scale manufacturing sector contracted 0.51% during the July- February period of this fiscal year when compared with the same period of last year.
This suggests that the economic growth rate in the third quarter may also remain subdued, barring better output in the agriculture sector.
The IMF report indicates that inflation for this fiscal year may persist at 24.8%, approximately 1% higher than its forecast from four months ago. This adjustment comes as the PBS reported a slowdown in the inflation rate to 20.7% in March.
Another round of increases in the prices of gas and electricity is also around the corner, which would further stoke inflation.
The IMF report further stated that during the next fiscal year, Pakistan’s economy may grow by 3.5%. It added that inflation could stay around 12.7%, which is 1% higher than its previous forecast.
The IMF released the report a day before Pakistan’s Finance Minister Muhammad Aurangzeb is scheduled to meet with the Managing Director of the IMF to secure another bailout package.
