WASHINGTON (Web Desk) – The World Bank has said the devastating effects of the August 2022 floods, policy uncertainty and shrinking foreign exchange resources have depressed economic activity in Pakistan as the top financial institution revised the country’s GDP growth for the current year by 1.6 per cent to 0.4pc.
Moreover, it portrayed a bleak future in the medium term for Pakistan, saying economic recovery in the next two fiscal years was expected to be anaemic – 2pc in 2023-24 and 3pc in 2024-25. The reason for this trend is the government’s limited fiscal room to support recovery from flood-related damages.
In its latest report, “Global Economic Prospects”, the World Bank said the growth rate would stay at 2pc in 2023-24 – next fiscal year – a 1.2pc reduction from an earlier estimate released in January.
The latest projection comes just when Tuesday’s National Economic Council (NEC) set a growth target of 3.5pc for the coming fiscal year.
While noting that the country is facing shortage of foreign reserves for importing food items and other goods, the global financial institution said agriculture output is likely to have contracted for the first time in two decades.
The World Bank said exchange rate flexibility resulting in 20pc depreciation in the Pakistani rupee since January had sharply increased headline consumer price inflation to 38pc – the highest since records began in the late 1970s.
At a time when many circles in the country have expressed their reservations and resentment over the high-interest rate, the global lender said policy rate increases had not kept pace with expected inflation; consequently, accurate interest rates have turned profoundly negative.
However, it said the South Asian countries would again start witnessing a reduction in poverty after a recent upward movement since 2020-21 – when COVID hit the world. But this decline, it warned, would not be as swift as previously expected, given the impacts of high inflation, slow recovery in employment, and withdrawal of pandemic-related food support.
