The report projects real GDP growth will reach 1.7% in FY24 and 2.4% in FY25.
Pakistan’s economy is expected to rebound in the coming fiscal year, but significant challenges remain, according to a new report by the World Bank.
The report projects that real Gross Domestic Product (GDP) growth will reach 1.7% in FY24 and 2.4% in FY25. It is based on the assumption that the government implements its International Monetary Fund (IMF) program, secures new external financing, and continues to tighten fiscal policy.
However, the report warns that growth will likely remain below potential over the medium term and that the economy will remain vulnerable to domestic and external shocks.
The report highlights the following key challenges:
- High inflation: Inflation is at record highs in Pakistan and is expected to remain elevated soon.
- Widening current account deficit: The current account deficit is expected to widen in the near term due to limited easing of import restrictions and higher domestic energy prices.
- Weaker currency: The Pakistani rupee has depreciated significantly recently and is expected to remain under pressure.
- High public debt: Public debt is high, and interest payments are consuming a growing share of government spending.
- Political uncertainty: Political uncertainty is a significant risk to the economy.
The report recommends several reforms to address these challenges:
- Comprehensive fiscal reforms: This includes reducing tax exemptions, broadening the tax base, and improving public debt management.
- Improved public expenditure: This includes reducing distortive subsidies, improving the energy sector’s financial viability, and increasing private participation in state-owned enterprises.
- Strengthened debt management includes improving institutions and systems and developing a domestic debt market.
The report also calls for boosting private sector investment and seizing opportunities created by the global energy transition.
