The International Monetary Fund cuts its forecast for economic growth for Pakistan amid rising inflation

In its latest projections, the International Monetary Fund cut Pakistan’s economic growth estimate to 0.5 percent, while estimates of inflation forecasts will rise well above 20 percent for at least two years.

Staggering estimates show the deep rooted financial crisis in Pakistan, which is showing its harmful effects on the people, who are facing severe hardships, which is not going to end soon for the time being.

According to IMF estimates, interest rates in Pakistan are also expected to remain at their highest levels.

The International Monetary Fund’s World Economic Outlook report also downplayed Pakistan’s current account (CAD) deficit forecast for the current fiscal year, estimating it at around 2.3 percent of GDP, which many experts believe is an unrealistic forecast.

According to the forecast, Pakistan’s GDP growth has been revised with a downward trend, while the inflation forecast has been revised with an upward trend, which is in line with the current harsh, difficult and faltering conditions of the country’s economy.

The revision of the IMF’s inflation estimates for Pakistan also highlights a significant jump compared to the eighth revision of the lender’s Expanded Financing Facility (EFF), which was expected at around 19.9 percent.

However, a review of the inflation rate for the current fiscal year showed the measure to be over 27 percent.

The current annual inflation rate in Pakistan is recorded at its highest level in 50 years at at least 35 percent.

And according to the International Monetary Fund’s forecasts, the average inflation forecast for the next fiscal year 2023-24 has risen to at least 21.9 percent, which is a huge increase compared to what it was eight months ago, when the International Monetary Fund expected an inflation rate of 10 percent in a year 2023-24.

Experts say expectations of rising inflation indicate that the current government will not have leverage to cut interest rates if it intends to enter the new IMF programme.

The country’s central bank has already raised the interest rate by 21 percent. Khurram Shahzad, an economist, said the figure remains negative if adjusted for inflation.

Pakistan claims to have secured a financing guarantee of at least $2 billion from Saudi Arabia and is awaiting confirmation of another $1 billion loan from the UAE.

However, even after the confirmations, there is still a gap of at least $3 billion.

-IANS
hamza / ksk /