Pakistan’s economy to slow down from 6 to 3.5% in FY23

Despite fluctuations in growth, Pakistan’s economic growth reached around 6 per cent in the fiscal year 2022. The driving factors behind the growth were higher private consumption, expansion in the agriculture and services sector and industry, specifically large-scale manufacturing. However, in the fiscal year 2023, Asian Development Bank has estimated that the growth rate is expected to go down to 3.5 per cent from 6 per cent. It is due to the devastating impacts of floods, policy tightening and fiscal and external imbalances.

The recent floods in Pakistan affected 33 million people and have caused widespread damage. It has added profound risk to the country’s outlook. Many people have lost their sources of income and houses to live in. The most affected people by climate change are the poor and they do not have the resources to reconstruct their homes and cannot survive without the support of others. On top of that, tight policy and inflation have made it difficult for the population to run their businesses. The low wages are not enough to meet the ends. Moreover, the political instability is also adding to the slow growth. The employment conditions and tightening monetary policies are expected to lead to a contraction in domestic demand in FY23. Agriculture growth is also expected to be less due to high input costs. The reduced production and demand will put a constraint on the rupee’s depreciation, eventually resulting in slow economic growth.

The government of Pakistan can control the economic situation of the country by devising policies that strengthen the rupee value. They must give financial support to the people to elevate them from poverty and misery. The flood-related reconstruction and economic reforms will catalyse international support as well which will stimulate growth. The restoration of political stability along with the implementation of reforms in accordance with the IMF’s programmes will help boost the economy. The allocation of Social and development spending must be focused on the vulnerable. Apart from financial support, there is a need for relief, rehabilitation, and reconstruction to support people, livelihoods, and infrastructure from the government of Pakistan and international organisations such as ADB.