IMF Reduces Growth Forecast to 3.5% in FY23

The International Monetary Fund (IMF) has forecasted Pakistan’s economic growth to drop to 3.5 percent and average inflation to surge up to 20 percent.

In the breakdown released in the statement after the latest approval for the combined 7th and 8th review, IMF has significantly revised its projections from the previous review. Previously, Pakistan’s economy grew at 5.97 percent. Now, owing to the weakening economic conditions and soaring inflation, the global lender has projected Real GDP growth of 3.5 percent.

Previously, IMF had projected inflation to settle at 7.8 percent, however, this has taken a major turnaround as the fund forecasts inflation to surge to 19.9 percent at the end of the current fiscal year.

As per the statement, IMF noted, “Pakistan is at a challenging economic juncture. A difficult external environment combined with procyclical domestic policies fueled domestic demand to unsustainable levels. The resultant economic overheating led to large fiscal and external deficits in FY22, contributed to rising inflation, and eroded reserve buffers.”

Commenting on the matter, Deputy Managing Director and Acting Chair, Ms. Antoinette Sayeh, said, “Pakistan’s economy has been buffeted by adverse external conditions, due to spillovers from the war in Ukraine, and domestic challenges, including from accommodative policies that resulted in uneven and unbalanced growth. Steadfast implementation of corrective policies and reforms remains essential to regain macroeconomic stability, address imbalances, and lay the foundation for inclusive and sustainable growth.”

In its statement, the IMF outlined that the program seeks to address domestic and external imbalances, ensure fiscal discipline, and debt sustainability while protecting social spending, safeguarding monetary and financial stability, maintaining a market-determined exchange rate, and rebuilding external buffers.



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