IMF Predicts Slow Economic Growth and Rising Inflation for Pakistan; Forecasts GDP Growth at 3.5 Percent and Inflation Reaching 9.9 Percent Amid External Pressures
ISLAMABAD : The International Monetary Fund (IMF) has predicted economic growth stagnation and increase in inflationary pressures for Pakistan, forecasting the economy to grow at 3.5 percent and inflation to surge to 9.9 percent.
The IMF’s latest regional economic outlook report for the Middle East and Central Asia region notes that Pakistan is grappling with ‘double headwinds’ of low growth, high inflation and growing external financial pressures. The government has made an ambitious target for GDP growth for the current fiscal year of 4 percent at the very least, whereas the Fund foresees a much lower growth of 2.3 percent. Additionally, rein in price increases could, at some point, require additional interest rate hikes as annual inflation reached 11.1 percent in August, the IMF says.
The following are key highlights from the IMF Regional Economic Report on Pakistan:
Rising imports and a slower growth in remittances of workers (which is estimated at $45.5 billion) could push the current account deficit to $4.5 billion, much higher than the government’s estimate of $2.5 billion, the report states as the two factors combine to widen the current account deficit.
External vulnerabilities will also be high as the IMF estimates that the total external financing requirements of Pakistan will be elevated at 22-25 percent of GDP, further increasing external vulnerabilities.
On the export performance, the IMF decried a lack of performance and said it was important to keep the exchange rates flexible in order to preserve foreign exchange reserves and also encouraged Islamabad to take structural steps to fulfill its financial commitments.