Recently, the World Bank highlighted in a report that Pakistan’s economic growth rate has slightly come down to 3.4% during the current fiscal year compared to 3.9% last year. However, with proper structural reforms, the economy can hit the 4% growth mark. In the report titled, South Asia Economic Focus Shifting Gears: Digitisation and Services-Led Development, certain fiscal and monetary measures can help Pakistan get its economic indicators back on track. The report comes ahead of the annual meetings of the International Monetary Fund (IMF) that will discuss the state of Pakistan’s economy and provide a way forward.
The report predicts the South Asian economy to grow by 7.1% in 2021-2022, which is more than the 3.4% growth rate projected by the IMF for the year 2020-23. The report also claims that the politically turbulent situation in Afghanistan contributed to the overall decline in Pakistan’s expected growth rate. Moreover, lower capacity for vaccination and general unwillingness to be vaccinated has reduced investor confidence, and ultimately prospects of business activity.
With increasing inflation, expanding imports, domestic energy tariff hikes and higher oil and commodity prices, the current account deficit is expected to increase to 2.5% of GDP. Weighing the proportion of all these factors, WB recommends that the government needs to implement fiscal and monetary measures that can sustain macroeconomic stability, increase competitiveness, and improve the financial stability of the energy sector.