The Pakistan Development Outlook report, issued by the World Bank, paints a grim picture of the economy’s trajectory in the upcoming years.
According to the report, the growth rate is forecasted to languish below 3% until 2026. The latest report titled ‘Pakistan Development Update: Fiscal Impact of Federal State-Owned Enterprises’ highlights the World Bank’s anticipation of sustained economic constraints over the medium term.
The World Bank expresses concerns regarding Pakistan’s economic prospects, attributing them to a lack of significant and sustained reforms. Persistent trade deficits and limited access to external financing, particularly from the private sector, are identified as key challenges. Despite the recent successful completion of the International Monetary Fund (IMF) Stand-By Arrangement (SBA) and ongoing financial arrangements, Pakistan’s foreign exchange reserves are projected to remain low.
Although Pakistani authorities recently concluded the final review of the SBA, with expected disbursements of $1.1 billion in the near future, discussions continue with the international lender for a more comprehensive program to address macroeconomic issues. The World Bank warns that continued import management measures and stringent monetary and fiscal policies could disrupt domestic supply chains and dampen consumption and investment.
In the absence of a robust and credible economic reform strategy, the World Bank anticipates subdued confidence and investment, projecting a meager real GDP growth of 1.8% in FY24. However, with an anticipated boost in confidence through the implementation of a new IMF program, output growth is expected to gradually rebound to an average of 2.5% over FY25 and FY26, albeit remaining below potential in the medium term.
