Business

IMF cuts Pakistan’s GDP growth rate to 0.5% for FY23

Published

1 year ago

Farwa

IMF says CAD to clock in at 2.3% in FY23 and 2.4% in FY24.
Close to 90% of advanced economies will experience slowing growth.
Most countries will avoid a recession in current fiscal year.

As the economic situation remains gloomy, the International Monetary Fund (IMF) slashed Pakistan’s real GDP growth rate projection from 2% to 0.5% for the current fiscal year.

In the latest World Economic Outlook (WEO) report released on Tuesday, the IMF forecast that the country’s GDP growth rate would be 3.5% in fiscal year 2024. In its last report issued in January, the lender had downgraded the growth projection to 2% from 3.5%.

The IMF report forecast that inflation, measured by the Consumer Price Index (CPI), would be recorded around 27.1% in FY23 and fall to 21.9% in FY24.

Meanwhile, the current account deficit (CAD) was forecast to clock in at 2.3% and 2.4% in FY23 and FY24, respectively.

The IMF’s downgrading comes days after the World Bank and Asian Development Bank lowered Pakistan’s growth rate projections to 0.4% and 0.6%, respectively.

The country’s economy has been struggling to recover, with inflation at a decades-high level and several companies shutting down or reducing operations citing the economic situation. The delay in the release of an economic bailout by the IMF is adding to the uncertain situation.

Global situation

The international lender lowered its outlook for the global economy as well, while predicting that most countries would avoid a recession this year despite economic and geopolitical concerns.

The IMF predicted the global economy would grow by 2.8% this year and 3% in 2024, a decline of 0.1% from its previous forecasts in January.

“The global economy is recovering from the shocks of the last few years, and particularly of course the pandemic, but also the Russian invasion of Ukraine,” IMF chief economist Pierre-Olivier Gourinchas said in a press briefing ahead of the report’s release.

The leadership of the World Bank and IMF hope to use this year’s spring meetings to promote an ambitious reform and fundraising agenda.

But their efforts will likely be overshadowed by concerns among member states over high inflation, rising geopolitical tension, and financial stability.

Advanced economies drag down growth

The overall picture painted by the WEO is a gloomy one, with global growth forecast to slow in both the short and medium terms.

Close to 90% of advanced economies will experience slowing growth this year, while Asia’s emerging markets are expected to see a substantial rise in economic output — with India and China predicted to account for half of all growth, IMF managing director Kristalina Georgieva said last week.

Low-income countries, meanwhile, are expected to suffer a double shock from higher borrowing costs due to high-interest rates, and a decline in demand for their exports, Georgieva said. This could worsen poverty and hunger.

The IMF expects global inflation to slow to 7% this year, down from 8.7% last year, according to the WEO forecasts.

This figure remains significantly above the 2% target set by the US Federal Reserve and other central banks around the world, suggesting monetary policymakers have a long way to go before inflation is brought back under control.

The IMF’s baseline forecasts assume that the financial instability sparked by the collapse of Silicon Valley Bank last month has been broadly contained by the “forceful actions” of regulators on both sides of the Atlantic, Gourinchas told reporters.

But he added that central banks and policymakers have an important role to play to buttress financial stability going forward.

Poor productivity weighs on medium-term outlook

Looking forward, the IMF forecasts that global growth will fall to 3% in 2028, its lowest medium-term forecast since the 1990s.

Slowing population growth and the end of the era of economic catch-up by several countries including China and South Korea are a large part of the expected slowdown, as are concerns about low productivity in many countries, according to Daniel Leigh, who heads the World Economic Studies division in the IMF’s Research Department.

“A lot of the low-hanging fruit was picked,” he told reporters ahead of the publication of the World Economic Outlook.

“On top of that now, with the geopolitical tensions and fragmentation, this is going to also weigh on growth,” he said.

Business

Over 500 points are lost by PSX stocks during intraday trading.

Published

2 hours ago

Farwa

The market saw a bearish trend as it dropped more than 500 points, just hours after Pakistan’s Stock Exchange (PSX) reached a new milestone by reaching the 73,000 mark.

As compared to the previous close of 72,742.75 points, the KSE-100 index dropped to 72,177.22 points, or 565.52 points, or 0.78% lower.
Expectations of an interest rate drop of up to 100 basis points during today’s Monetary Policy Committee (MPC) meeting, according to Intermarket Securities director of research CFA Muhammad Saad Ali, are driving market confidence.

The market is also being driven, he continued, by favourable news flow on upcoming negotiations with the International Monetary Fund (IMF) for a new programme.

Last Friday, the late-session purchasing fueled a 1% advance in the stocks, which helped them close close to 73,000 points. Dealers reported this.

Closed at 72,742.75 points on Friday, the benchmark KSE-100 index saw a gain of 771.35 points, or 1.07%.

Notwithstanding the turbulent session, according to Chase Securities analyst Muhammad Rizwan, “the market rebounded with a strong start and achieved a new all-time high.”.

“This impressive performance was driven by significant contributions from various sectors: fertiliser added 386 points, commercial banks contributed 174 points, the power sector provided 112 points, and cement added 93 points, collectively reversing the previous negative close and boosting market sentiment.”

Business

Despite global tides, Pakistan’s economy is recovering, according to Governor SBP

Published

2 hours ago

Farwa

Ahmad, who was speaking at the ICMA Pakistan Members Convocation, emphasised the country’s economy’s outstanding development while also highlighting the difficult macroeconomic environment of the previous year, which was marked by rising inflation, depleting foreign exchange reserves, pressure on exchange rates, and increased uncertainty.

Nonetheless, in the present times, the PKR has stabilized and the stock market is rising to unprecedented heights, reserves have increased to around US$8 billion despite large debt repayments, and inflation is dramatically decreasing.

Ahmad gave the government and SBP credit for their unwavering commitment to addressing macroeconomic difficulties head-on for this reversal.

Ahmad emphasized that the government’s efforts to reduce spending and achieve fiscal consolidation, together with the need for unpopular but necessary actions like the SBP’s increase of the policy rate to 22%, are producing beneficial results.

As global shocks like climate change, technology improvements, and cyber threats become more complex, he emphasises the significance of new viewpoints and creative solutions in tackling long-standing economic concerns.

Congratulating the graduating accounting professionals, Ahmad emphasized the importance of having a thorough understanding of accounting, finance, and economics in order to create workable solutions. He also urged the professionals to take a proactive approach to addressing new difficulties.

Ahmad emphasized the value of leadership abilities in policymaking and urged graduates to positively impact Pakistan’s economic landscape by working hard, being devoted to excellence, and contributing their full effort.

Along with giving a hearty welcome to Governor Jameel Ahmad and other SBP dignitaries, ICMA Pakistan President Shehzad Ahmed Malik also praised the SBP team’s efforts to stabilize the currency. With that, Ahmad presented the graduating CMAs with their degrees.

Business

The IMF board is anticipated to approve Pakistan’s $1.1 billion payout today.

Published

3 hours ago

Farwa

The IMF executive board meeting is scheduled to go until May 3, according to specifics. Based on the sources, it is expected that the international lender will approve Pakistan’s $1.1 billion payout today.

The State Bank of Pakistan is anticipated to obtain the final tranche from the IMF tomorrow, following approval, they added.

On July 12, 2023, Pakistan took advantage of a $3 billion loan package offered by the International Monetary Fund (IMF).

Thus far, Pakistan has been granted two installments totaling $1.9 billion: $1.2 billion in July and $700 million in January 2024.

On the last assessment of a $3 billion loan plan, Pakistan and the International Monetary Fund (IMF) came to a staff-level agreement last month.

Following their week-long visit to Islamabad, which ended on March 19, the IMF delegation made the announcement.

Global lender expressed its optimism that the incoming caretaker administration and central bank of Pakistan would persist in their efforts to stabilize the country’s economy, complimenting them on their “strong program implementation.”

In order to further solidify economic and financial stability, the new government is dedicated to carrying out the policy initiatives that were initiated under the existing Stand-By Arrangement for the balance of this year, the IMF official stated.

In June of last year, the IMF granted Pakistan’s economic stabilization program support through a critical nine-month agreement.