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Pakistan is expected to grow 2.2% in FY 2024, supported by private consumption and net exports, a new report said.
The modest growth is weighed down by a lack of foreign exchange and high interest rates that continue to affect the manufacturing and service sectors, said the Institute of International Finance (IIF) in the report.
The cash-strapped nation secured a $3 billion loan programme from the IMF in July last year. Earlier this month the multilateral lender completed the first review of Pakistan’s Stand-By Arrangement (SBA) economic reform program. This allowed the disbursement of $700 million, bringing total IMF disbursements in the current fiscal year (ending June 2024) to $1.7 billion. IMF expects the country to grow at 2% in 2024 as recovery expands in the second half of the year.
IIF, a trade group for the global financial services industry, said, the disbursement will bolster Pakistan’s critically low foreign reserves, currently at $8 billion or six weeks of import coverage.
The report said while inflation will gradually decline to an average of 24% in the current fiscal year and 14% in FY 2024/25, this will be partly offset by a depreciating rupee, rising energy prices, and increased taxes feeding into inflation.
Imports have continued to decline, in large part due to poor domestic demand. "However, we expect this trend to reverse in in the second half of the FY2024, driven by the elimination of import restrictions, depreciation of the rupee, and a pick-up in domestic demand."
The report noted that recovering imports, lackluster remittances, and high interest payments will outweigh the solid recovery in exports of goods and the current account deficit will increase to -1.0% of GDP.
"IMF and multilateral program loans, bilateral financing, and deposits from Saudi Arabia, the UAE, and China will help finance the deficit, leading to reserves increasing by $ 4.5 billion to $10.1 billion by end June of this year, equivalent to 1.7 months of import coverage."
(Writing by Brinda Darasha; editing by Daniel Luiz)
