Economists skeptical of Pakistan’s 3.6% growth forecast for next fiscal year
ISLAMABAD: Pakistani economists expressed skepticism on Saturday about government claims that economic growth can accelerate to 3.6 percent in the next fiscal year from 2.4 percent in the last fiscal year, and warned that employment and poverty rates could rise further in the coming months.
Prime Minister Shehbaz Sharif’s government is due to present the annual budget on June 10 as the country faces an economic crisis with double-digit inflation and struggles to secure funding from the International Monetary Fund (IMF).
The government on Friday approved a 3.6 percent growth target for the 2024-25 budget, increasing the development allocation to 1.2 trillion rupees ($4.3 billion) from 950 billion rupees ($3.4 billion) in the previous fiscal year, which has now been reduced to 717 billion rupees ($2.6 billion) due to fiscal constraints.
“Economic indicators, including growth in agriculture and large-scale manufacturing, show that it is almost impossible for the government to achieve a growth rate of around 3 percent,” said Sajid Amin, deputy executive director at Sustainable Economist.
An official at the Development Policy Institute (SDPI) in Islamabad told Arab News.
“Governments usually budget for high growth targets and then revise them downwards,” he said, referring to last year’s growth rate of just 2.4 percent when the government targeted 3.5 percent.
Amin said around nine million youths enter the labour market every year and Pakistan needs a growth rate of at least five percent to create employment opportunities for them.
“Unfortunately, unemployment and poverty rates will rise even if the government achieves its growth targets,” he said.
A recent Planning Commission report said the government expects inflation to ease to 12 percent next fiscal year, but acknowledged that growth prospects “depend on political stability, exchange rates, macroeconomic stabilization resulting from the IMF program, and projected declines in global oil and commodity prices.”
Economist Ali Khizar said the country faces a significant funding gap that will constrain economic development as real interest rates remain positive.
“Pakistan’s current account balance is expected to remain close to zero until foreign exchange reserves increase,” he told Arab News, adding that commercial financial revenues would remain low and Pakistan would not be able to achieve its targeted growth rate.
“Even a growth rate of 3.6 percent is not good to create employment opportunities and lift people out of poverty,” he continued, adding that Pakistan would need to ensure austerity fiscal and monetary policies with high interest rates to secure an IMF loan programme.
These will slow down the economy, he noted.
