Released on May 10, 2024, the IMF Staff Report unveiled projections for Pakistan’s economy in 2024-25 and beyond.
Key to note, these projections do not include the potential impact of a new Extended Fund Facility, currently under negotiation, expected to commence before FY2024-25.
The Staff Report’s balance of payments projection lacks provisions for new IMF funding in FY2024-25, predicting a net outflow of $1.5 billion from Pakistan to the IMF.
Despite this, the IMF suggests Pakistan’s economy will fare relatively well, with stability and external transaction continuity anticipated, leading to an increase in foreign exchange reserves to $13.6 billion by the fiscal year’s end.
However, this optimism is tempered by Pakistan’s fragile economic state and ongoing negotiations for a new IMF Programme. Without such a program, the likelihood of Pakistan receiving $10 billion in external assistance in FY2024-25 is slim.
Presuming the IMF projections for FY2024-25 account for an ongoing program, attention turns to the forecasts. Yet, an examination of the IMF’s expectations for FY2023-24 is necessary.
Current projections indicate a low GDP growth rate of 2% for FY2023-24, with contrasting sectoral growth rates: a robust performance in agriculture but near-zero growth in industry and services.
FY2024-25 forecasts a challenging rise in GDP growth to 3.5%, contingent upon a strong recovery in industrial and service sectors, particularly given potential agricultural setbacks.
A notable concern for FY2024-25 is inflation, projected to decline sharply from 24.8% to 12.7%. However, factors such as currency depreciation, rising utility tariffs, and ambitious tax targets may limit this decline.
IMF projections suggest a consistent budgetary position between FY2023-24 and FY2024-25, with a budget deficit close to 7.5% of GDP and a primary surplus at 0.4% of GDP.
Despite anticipated improvements in export and import growth rates for FY2023-24, FY2024-25’s export growth is modestly projected at 4.3%, while imports are expected to rise by 10%.
These projections, while optimistic, remain contingent upon various economic factors and policy decisions, underlining the need for concerted fiscal efforts in the coming fiscal year.