World Bank (WB) forecasts Pakistan's growth rate of 2.4% in FY 2024-25
The World Bank (WB) anticipates a challenging economic
outlook for Pakistan from July 2023 to June 2024, projecting a modest growth of
1.7%. However, the WB envisions an improvement with a growth rate of 2.4% in
the fiscal year 2024-25, as inflationary pressures are anticipated to ease
during this period.
In its report titled 'Global Economic Prospects — January
2024,' the WB indicated that Pakistan's monetary policy is likely to remain
stringent to curb inflation, while fiscal policy is expected to contract due to
elevated debt-service payments.
World
Bank concerned over obstacles in privatization of Pakistan’s State Owned
Entities (SOEs)
The report highlighted concerns about weak confidence
stemming from political unrest contributing to sluggish growth in private
demand. The WB also cautioned that uncertainties surrounding the 2024
parliamentary elections in Pakistan and polls in South Asia could impact
foreign investment in the region.
With elections scheduled in various South Asian countries,
including India, Maldives, and Pakistan in 2024 (with Bangladesh having already
conducted polls), the report suggested that pre-election spending, especially
in financially vulnerable countries, might increase fiscal vulnerability.
However, it noted that growth prospects could improve post-elections with the
end of uncertain policies.
World
Bank recommends establishment of a 'National Council of Ministers' in Pakistan
The WB report outlined that Pakistan's output contracted by
an estimated 0.2% in the FY22-23 due to the aftermath of the 2022 floods and
heightened political uncertainty. The report mentioned that despite elevated
consumer price inflation, signs of stabilization in the rupee were observed by
late 2023, attributed to factors like increased liquidity in the foreign
exchange market, tighter enforcement of regulations, a shrinking money supply,
a balance-of-payments surplus, and a moratorium on Chinese debt repayments.
The WB emphasized that countries with limited fiscal
buffers, including Nepal and Pakistan, were at higher risk of adverse impacts
on low-income households, potentially leading to increased poverty and
inequality. Additionally, countries facing security threats, including
Afghanistan, were also mentioned in this category.
IFC
and World Bank to invest $4.5 billion for economic transformation in Pakistan
In the broader context of South Asia, the WB expects growth
to slightly slow to a robust 5.6% pace in 2024 before firming to 5.9% in the
following year. The report identifies domestic demand, public consumption, and
investment as key drivers of economic growth, with a subdued but contributing
external demand expected.
Source: Express Tribune