The International Monetary Fund (IMF) on Monday said that Pakistan’s inflation and debt-to-GDP ratio were expected to fall by 4.8% and 73%, respectively, in 2025.
In its five-year forecast, the IMF said there would be a considerable slump in the country’s loans, as well as inflation to fall by 2035. This decrease, it added, would be witnessed starting 2021.
It added that inflation would go down from 10.5% to 4.8% in five years. The rates in 2021, 2022, 2023, 2024, and 2025 were forecasted at 9.0%, 8.0%, 6.1%, 4.9%, and 4.8%, respectively.
The IMF noted that debt-to-GDP ratio would also decrease from 90% to 73% in five years. The rates in 2021, 2022, 2023, 2024, and 2025 were forecasted at 87.8%, 83.7%, 80.8%, 77.4%, and 73.0%, respectively.
Meanwhile, IMF’s Resident Representative Maria Teresa Daban Sanchez has said that the international lender would continue to provide its support to Pakistan in order to face the socio-economic challenges posed by the coronavirus outbreak.
Maria Teresa Daban Sanchez was speaking at the online policy dialogue organised by the Sustainable Development Policy Institute (SDPI) on IMF’s support to Pakistan under Rapid Finance Instrument (RFI), existing Extended Fund Facility (EFF) and debt rescheduling. She said that IMF was happy at the way Pakistan was implementing different policies to achieve fiscal consolidation and macroeconomic stability, adding that the performance of Pakistan’s economy prior to the emergence of coronavirus and its devastating impacts, had been quite satisfactory.
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While commenting on opening up of the construction sector, she said that IMF supported the opening of the labour-intensive sector where daily wagers may be absorbed. However, she hoped that amnesty announced for investment in the construction sector was temporary, and would be withdrawn once the situation becomes normal.
Recommendations for Pakistan by IMF
“The IMF recommends that Pakistan as well as other countries re-calibrate their policy actions as we move on. Therefore, the regulatory measures taken are temporary and regulatory relaxation might not be necessary for the future as it can create problems”, she added.
In addition to it, she said that the ongoing EFF programme was very much intact, adding that IMF was working closely with the authorities in Pakistan and the next review mission may take place virtually.
Regarding the EFF, she said that as the medium-term economic outlook was changing, the IMF had to recalibrate everything from targets to trajectories. However, we need to continue working on EFF as a framework, as the programme provides continuity along with a healthy and sustainable trajectory from an economic point of view. “It is encouraging that the government is committed to fiscal consolidation and reforms once the things get normal,” she added.
While commenting on the overall impact of COVID-19 outbreak on Pakistan’s economy, she said that there would be a significant cut in imports from Pakistan in various countries, the remittances would be reduced, tax collection would reduce considerably and the growth rate may get reduced to -1.5 per cent. It is in this context that funds under RFI arrangement would help Pakistan to bridge the gap in immediate financing needs, she added.
World Bank warns Pakistan falling into recession amid COVID-19
South Asian countries are already facing the tumultuous state of economy posing low economic growth for the last half-century. Amidst the outbreak of coronavirus globally, the region may face worst economic performance, said the world bank report on Sunday on the 12th of April.
The latest report by the World Bank says that Pakistan, Afghanistan, and the Maldives may fall into recession due to COVID-19. The world bank further added that Pakistan is more vulnerable to the recession due to increased population growth of 1.8 per cent which would debilitate the economic growth of the country. The report has also cited that Bangladesh, Pakistan, and Afghanistan are the densely populated countries due to which they can be next prey to the ongoing coronavirus in Pakistan. In combination, the three nations have 1.8 billion population which is vulnerable to the COVID-19.
India’s economy, the region’s biggest, is expected to grow 1.5% to 2.8% in the fiscal year that started on the 1st of April. The World Bank has estimated that it will grow 4.8% to 5% in the fiscal year that ended on March 31.