(CTN News) – Pakistan has recently announced a significant downward revision in its GDP growth estimate for the fiscal year 2022-23, citing concerns over a possible sovereign default.
The country’s national accounts committee revealed that the growth projection had been adjusted from the earlier estimate of 2% to a mere 0.29%. This reduction is primarily attributed to a contraction in industrial growth and sluggish performance in the agriculture and service sectors.
Downturn in Pakistan’s Economy: Impact on Growth Rates
According to the committee’s statement released late on Wednesday, the estimated growth rates for the respective sectors stand at 1.55% for agriculture, -2.94% for industry, and 0.86% for services. These figures highlight the overall economic slowdown experienced by Pakistan.
In retrospect, Pakistan’s GDP growth rate for the previous fiscal year, FY2021-22, was revised upward to 6.10% from 5.97%. Similarly, the final figure for FY2020-21 was adjusted to 5.77% from 5.74%.
Despite these positive revisions, Pakistan has been grappling with numerous challenges, including natural disasters, a severe balance of payments crisis, and political instability, all of which have hindered its economic progress.
Having faced devastating floods and political turmoil triggered by the removal of Imran Khan as prime minister, Pakistan’s $350 billion economy has witnessed a sharp decline from the previous year’s growth rate of over 6%.
To mitigate these economic challenges, Pakistan has been seeking a deal with the International Monetary Fund (IMF) to unlock $1.1 billion in stalled funding from a $6.5 billion bailout package agreed upon in 2019. The failure to secure this funding has further complicated Pakistan’s financial situation.
The central bank recently expressed concerns that GDP growth for the current year will likely be significantly lower than the previous year, even lower than its own revised estimate of 2%.
Furthermore, the country has been grappling with soaring inflation, hitting a record high of 36.4% in April, while its currency has depreciated to an all-time low as part of IMF conditions aimed at aligning the exchange rate with the market.
It is worth noting that the committee’s latest GDP growth projection of 0.29% for this fiscal year is lower than the World Bank’s estimate of 0.4%, while the IMF predicted a growth rate of 0.5% in April.
In conclusion, Pakistan’s downward revision of its GDP growth estimate for FY2022-23 to 0.29% has raised concerns about the possibility of a sovereign default. The country faces numerous challenges, including natural disasters, a balance of payments crisis, and political instability.
The urgency to reach an agreement with the IMF to unlock funding has become even more critical. Pakistan’s economy has witnessed a significant downturn, with growth rates declining and inflation soaring.
The central bank’s projection of lower GDP growth and currency depreciation further accentuates the economic challenges faced by the country.