The Asian Development Bank (ADB) has warned that soaring prices in Pakistan will push South Asia’s inflation higher and projected a 1.9 per cent growth rate for Pakistan in FY2024 (2023-24), slightly below the April projection, assuming continued implementation of reforms and supportive macroeconomic policies, recovery from flood-induced supply shocks, and improving external conditions.
Political stability following general elections later this year, if achieved, will boost business confidence, as will a new standby arrangement agreed with the International Monetary Fund (IMF) to support economic stabilization and rebuild fiscal buffers, the ADB said in its Asian Development Outlook September 2023.
It warned that average inflation in Pakistan will soar to 29.2 per cent caused by supply shortages, continued currency depreciation, import restrictions, and fiscal stimulus for post-pandemic recovery.
“Normalized food supplies and lower inflation expectations, albeit tempered by higher power and gas tariffs and likely currency depreciation, could ease inflation somewhat in FY2024, but Pakistan’s inflation rate is now expected to remain at 25.0pc in FY2024, substantially higher than forecast in April.”
The ADB noted that adherence to an economic adjustment programme [signed with the IMF] through April 2024 would be critical for restoring stability and gradual growth recovery, adding that price pressures were to remain elevated. “Downside risks to the outlook remain exceptionally high.”
Meanwhile, the ADB said the updated assessment of economic growth in Developing Asia this year will be slightly lower than expected as the weakness in China’s property sector and El Nino-related risks cloud regional prospects.