THE Asian Development Bank (ADB) on Thursday warned Pakistan’s economic outlook was uncertain, with high risks on the downside, as political uncertainty would remain a key risk to the sustainability of stabilization and reform efforts. In its April 2024 ‘Asian Development Outlook’, the Manila-based lending agency said potential supply chain disruptions from the escalation of the conflict in the Middle East would weigh on the economy. The report projected that economic growth in Pakistan for the FY2025 would reach 2.8%, driven by higher confidence, reduced macro-economic imbalances, adequate progress on structural reforms, greater political stability, and improved external conditions.
It is a reality that the country suffered hugely during the last few years mainly because of political instability caused by the lust for power, a tug-of-war among stakeholders for concentration of power and politically driven violence and protests. No doubt, attempts were made during this period by successive governments to stabilize the economy but these measures made the life of the people miserable without producing desired results in terms of economic recovery or sustainable growth. There were times when Pakistan witnessed a robust growth rate of 6 to 7% which dropped to shameful levels due to political infighting and disruption in policy continuation. At the instance of the International Monetary Fund (IMF), the Coalition Government, Interim set up as well as the incumbent Government put enormous burden on masses in the name of economic recovery but still the growth rate is project at 1.9% for the current financial year and 2.8% for the next year but that too is linked to many ifs and buts. The economy is unlikely to benefit from a multitude of measures that the Government intends to launch to improve the situation as the key factor of ‘political instability’ as also identified by the Asian Development Bank remains a potent threat. The opposition has already announced its plans to launch a country-wide protest campaign over the issue of alleged rigging in the general elections. The KP Government is on a warpath with the Centre while externally-linked terrorist organizations are striking here and there as part of their strategy to destabilize the country.
One can imagine the plight of the people who are frantically waiting for some concrete relief in the face of super-inflation caused mainly by the governmental policies. While the Government leaders are celebrating the routine modest reduction in fuel price adjustment and quarterly adjustment in the electricity bill for April, the ADP has projected that the high inflation would continue during 2024 and is expected to marginally come down in 2025. It observed that improvement in food supplies and moderation of inflation expectations would likely ease inflationary pressures but further increases in energy prices envisaged under the IMF Stand-By Agreement were projected to keep inflation high. According to the report, the relaxation of import restrictions, coupled with economic recovery, was expected to widen the current account deficit. The report also highlighted that imports were expected to expand during the year as domestic demand strengthened and the stabilization of the currency market made it easier for firms to import inputs. Thus, the current account deficit was projected to widen to 1.5pc of GDP in 2024. The country is also expected to continue to face challenges from substantial new external financing requirements and the rollover of old debt, exacerbated by tight global financial conditions. It is to be seen what strategy the new Finance Minister adopts besides exploring the China market for selling Panda bonds to raise $300 million. INF chief Kristalina Georgieva has also confirmed that Pakistan is seeking a potential fresh bailout package following the completion of the $3 billion Stand-By Arrangement (SBA) that expired on April 12. She acknowledged the improvement in the country’s economic situation but added that there are very important issues to be solved in Pakistan: the tax base, how the richer part of society contributes to the economy, the way public spending is being directed and of course, creating … a more transparent environment. The fuller impact of the new programme would be known when details about proposed conditionalities are available but the IMF has already been urging further hikes in electricity and gas tariffs besides further liberalization of the exchange rate – issues that have harmed the economy more than benefiting it in any way.
