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Wednesday, May 22, 2024

Finance Ministry Talks GDP and Inflation

Pakistan's economic landscape faces challenges as inflation forecasts and GDP growth projections shape monetary policy decisions amidst IMF funding approvals and efforts towards sustainable development.

Pakistan’s finance ministry forecasts inflation to range between 18.5% and 19.5% in April, with a slight easing anticipated in May to 17.5%-18.5%. These figures are part of the government’s efforts to target a range of 5%-7% by September next year. Despite the challenging inflationary environment, authorities remain cautiously optimistic about the trajectory.

Additionally, the Gross Domestic Product (GDP) growth for the second quarter of the fiscal year, ending in June, is estimated at 1%. However, prospects for improvement are on the horizon, with expectations of a better performance in the latter half of the fiscal year. These projections offer a mixed picture, reflecting the complexities of Pakistan’s economic landscape.

The Pakistan’s economic landscape faces challenges as inflation forecasts and GDP growth projections shape monetary policy decisions amidst IMF funding approvals and efforts towards sustainable development.

SBP opted to maintain its key interest rate at 22%, unchanged for the seventh consecutive policy meeting. This decision was made just hours before the International Monetary Fund (IMF) executive board approved $1.1 billion in funding under a $3 billion standby arrangement signed last year. The SBP’s monetary policy committee deemed it prudent to uphold the current stance to address inflationary pressures and steer towards the target range.

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While inflation is anticipated to follow a downward trajectory, recent fluctuations in oil prices pose a notable risk. Moreover, consumer inflation expectations saw a marginal increase in April, underscoring the challenges in managing price stability amidst external and domestic factors.

March’s Consumer Price Index (CPI) in Pakistan recorded a 20.7% increase compared to the same period last year, marking the lowest reading in nearly two years. This figure, below the finance ministry’s projections, reflects some progress in inflation management. However, ongoing vigilance and strategic measures are imperative to sustain this trend and achieve long-term economic stability.

Looking ahead, policymakers are tasked with navigating the delicate balance between fostering economic growth, curbing inflationary pressures, and securing vital financial support from international partners like the IMF. The economic outlook remains fluid, underscoring the importance of adaptive strategies and robust policy frameworks to address emerging challenges and capitalize on opportunities for sustainable development.