ISLAMABAD: The World Bank has cut Pakistan’s economic growth forecast for the next two years and also projected that Prime Minister Imran Khan’s government would miss inflation, public debt, and fiscal deficit reduction targets.
The findings that the WB reported in its annual flagship report, the South Asia Economic Focus Fall 2019, have underpinned challenges that the government will face at least till the end of the third year in power. The WB also said Pakistan’s economic behaviour is different than all the other South Asian nations.
Despite significant devaluation, the WB still sees the Pakistan rupee overvalued by the end of September by approximately 4.8%. It has shown the Real Effective Exchange Rate at 104.8 – an insertion that independent economists do not accept who currently see the rupee undervalued after significant devaluation by the Pakistan Tehreek-e-Insaf (PTI) government.
The report, released from Washington, predicted that for the first time since 2001 Pakistan’s progress towards poverty reduction would ‘stall’ due to macroeconomic adjustments initiated under the $6 billion 39-month International Monetary Fund (IMF) programme. Prime Minister Imran has already opened a public ‘Langar’ scheme to help poor people get a two-time free meal.
The bad news to miss key macroeconomic targets, except current account deficit, came a day after the PM’s Finance Adviser Dr Abdul Hafeez Shaikh announced that the government brought the trade and fiscal deficits under control during the first quarter of this fiscal year.
Pakistan, like many South Asian countries, is growing half of its potential¬ and in the fiscal year 2019-20, it would grow at a rate of only 2.4%, according to the WB report. The forecast is in line with the Ministry of Finance and the IMF projections.
“In Pakistan, growth is projected to deteriorate further to 2.4% this fiscal year, as monetary policy remains tight, and the planned fiscal consolidation will compress domestic demand,” said the WB.
It added that economic growth is expected to recover slowly, to just 3% in the next fiscal year 2020-21, as macroeconomic conditions improve and external demand picks up on the back of structural reforms and increased competitiveness.
The WB said the IMF programme is expected to help growth recover from the fiscal year 2021-22 onwards. But this recovery is conditional to relatively stable global markets, a decline in international oil prices and reduced political and security risks. In April, the WB had predicted Pakistan’s economy to grow by 2.7% in this fiscal year and 3.9% in the next fiscal year.