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IMF Report Highlights Economic Recovery and Challenges in Pakistan
The International Monetary Fund (IMF) has released a report highlighting the positive economic developments in Pakistan, noting a gradual economic recovery and a substantial decline in inflation. The State Bank of Pakistan (SBP) has been able to rebuild foreign exchange reserves, thanks to increased inflows and easing external pressures.
The report acknowledges the improved fiscal performance of the government, with a large primary surplus being posted. This positive trend suggests that consistent policy implementation can lead to confidence building and support economic recovery.
However, Pakistan still faces high fiscal and external vulnerabilities, including debt sustainability and crowding out of the private sector. Structural weaknesses continue to hinder productivity, investments, and growth. The IMF emphasizes the need for continued adjustment and creditor support beyond the current program period to address these challenges.
The report projects a 2 percent economic growth rate for Pakistan this year, with a potential increase to 3.5 percent in the next financial year. Inflation is expected to decrease from 24.8% to 12.7%, while unemployment is projected to fall from 8% to 7.5%. Fiscal deficit is estimated to be 7.5% this year and 7.4% next year, with improvements in the current account deficit as well.
Despite the positive outlook, political uncertainty remains a significant concern. Social tensions and the high cost of living could impact policy and reform implementation. The government aims to meet annual revenue targets, with contingency measures in place to address potential shortfalls.
Furthermore, the authorities plan to complete the bidding for Pakistan International Airlines’ (PIA) core business by June 2024, with a potential sale of a controlling stake. Proceeds from divestment would prioritize settling government guaranteed debt and addressing liabilities. Several smaller state-owned enterprises are also on the privatization list.
Overall, the IMF report underscores the need for continued policy adjustments and reforms to ensure Pakistan’s economic stability, sustainability, and inclusive growth in the coming years.
