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World Bank cuts Pakistan’s GDP growth forecast to 2%

The bank cites “the precarious economic situation, low foreign exchange reserves, and high budget and current account deficits” as the main reasons.

Islamabad, Pakistan — The World Bank is forecasting a difficult year for Pakistan and has revised the country’s growth forecasts to 2% for the current fiscal year from 4% last June, citing “a precarious economic situation, low foreign exchange reserves, and large and current account deficits”. the main reasons.

The bank said in its Global Economic Outlook report released on Tuesday that last year’s catastrophic floods have deteriorated the country’s economy, wreaking havoc mainly on agricultural output, which accounts for 23% of Pakistan’s domestic product (GDP) and provides jobs 37 %. its working population.

“The political uncertainty is making the economic outlook even more difficult. The recent floods in Pakistan are estimated to have caused damage equivalent to about 4.8% of GDP,” the World Bank said.

The forecasts for Pakistan are in line with the bank’s Global Outlook Report, which predicts a “sharp and prolonged deceleration with global growth falling to 1.7% in 2023 from 3.0% expected a year ago,” in almost six months predicted.

The South Asia region will see slower growth in the coming year, with forecasts remaining at 5.5% for 2023 while showing a slight improvement to 5.8% in 2024, he explained.

The slowdown in the region was “mainly due to weak growth in Pakistan,” the bank noted.

“Pakistan is facing difficult economic conditions, including the impact of recent floods and ongoing political and political uncertainty. As the country implements policies to stabilize macroeconomic conditions, inflationary pressures ease and post-flood reconstruction begin, growth is expected to accelerate to 3.2% in fiscal 2023/24, still below previous forecasts in the bank’s report.

By the end of 2022, Pakistan’s foreign exchange reserves had fallen to a four-year low of $6.7 billion, barely enough to cover its imports for a month.

The Pakistani rupee, which was valued at 176 rupees against the US dollar in January 2022, ended the year at 226 rupees, a depreciation of 28%. Inflation has reached record levels and a food crisis is threatening the country.

The Pakistani government is making tough economic choices to ensure the International Monetary Fund (IMF) provides the country with the funds it desperately needs.

Pakistan joined a $6 billion IMF bailout in 2019, which was increased by a further $1 billion the following year. At the height of the nationwide flooding in August last year, the IMF granted Pakistan a $1.17 billion package.

Speaking to IMF chief Kristalina Georgieva last week, Prime Minister Shehbaz Sharif said her country was “firmly committed to completing the IMF’s ongoing program.”

In a tweet on Saturday, Sharif said he had explained to the IMF chief “Pakistan’s economic difficulties, especially after the devastating floods,” adding that “an IMF delegation will be coming to Pakistan soon.”

Pakistan is also seeking financial support from friendly countries such as Saudi Arabia, China, and the United Arab Emirates.

Earlier this week, Pakistan also hosted an international donors’ conference in Geneva, where the global community pledged more than $10 billion to help rebuild the flood-ravaged country.

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