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Thursday, May 23, 2024

Pakistan’s economic recovery remains fragile, World Bank

In its annual flagship South Asia Economic Focus report released on Tuesday, The World Bank said that it does not see a swift economic turnaround for Pakistan.

According to World Bank’s Annual Flagship South Asia Economic Focus report released on Tuesday, a speedy economic recovery is not in sight for Pakistan. The country currently has a mere 1.3% growth rate and the public debt stands at an enormous 94% size of the nation’s economy in the current fiscal year.

The report came a day after the premiere sacked the second finance minister Abdul Hafeez Shaikh due to his failure to keep the rising inflation in check.

The Washington Based lender said that the economic recovery of the country remains fragile and the poverty levels are likely to increase too. It also revised its economic growth forecast for the current fiscal year and increased it to 1.3% which is still which is still less than half of around 3% that what the State Bank of Pakistan and the government had predicted.

PM Khan promised to cut down the public debt by doubling the tax revenues but was unsuccessful in doing so despite changing five Federal Board of Revenue chairmen and three finance ministers.

“I would not overstate the difference between the WB and the government’s projections of economic growth rate and debt-to-GDP ratio,” Hans Timmer, WB’s chief economist for the South Asia region. The trajectory is positive, he added.

The global lender also predicted a 9% inflation rate in Pakistan for this fiscal year, adding that it could slow down to 7% in the next fiscal year.

Due to the settlement arrears of the power sector, deficit is projected to remain elevated at 8.3% of GDP in this fiscal year. The government, however, had informed the cabinet that at the budget deficit would remain within the target of 7.1% of the GDP.

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The WB expects deficit to remain 7.7% of the GDP in the next fiscal year, adding that the public debt will remain elevated in the medium-term, as will Pakistan’s exposure to debt-related shocks.

The current public debt which stands at 93.9% of the GDP is also expected to rise to 94.4% in the next fiscal year.

WB predicted only 2% economic growth rate for the next fiscal year, which is almost half of what the government had predicted in its second last year in power.

About exports, the WB said that they were expected to decrease this fiscal year but are likely grow from next fiscal year, as external conditions become more favorable. But imports are also going to rise keeping in mind the high oil prices and increasing domestic activity.

Pakistan’s economy was severely impacted by the Covid-19 shock in the last fiscal year, leading to an increase in poverty. With the lifting of lockdown measures, the economy is showing signs of a fragile recovery, said the World Bank’s report.

The report also highlighted the poor vaccination campaign in Pakistan saying that as of March 23, Pakistan had vaccinated only 304,000 people, which was just 0.1% of the population and the date for vaccinating 70% of the eligible population was “unknown”.

Surge in Covid-19 cases as of end-March in India, Bangladesh and Pakistan may require continued restrictions, it added.

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It further stated that poorer income groups in India, Bangladesh and Pakistan suffer a greater fall in per capita consumption compared to the richer income groups due to Covid19.

The income gap between the poorest 90% of the population and the richest 10% widened even further in India and Pakistan because of Covid-19, it added.

Moreover, 40% of households suffered from moderate to severe food insecurity, as the poverty incidence rose in the last fiscal year, said WB