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

Exchange achieves all-time high: KSE-100 index surpasses 72,500 points

Published

2 hours ago

Farwa

With the benchmark KSE-100 index hitting a record-breaking high of 72,501 points, the Karachi Stock Exchange saw yet another incredible rise.

Within Pakistan’s financial environment, investors demonstrated a strong sense of trust in the market as the bullish trend continued.

As a result of the significant inflow of investment and optimism among market players, the index had an amazing 450-point rise during the trading session.

In their analysis of the market’s remarkable performance, financial analysts pointed to a number of causes for the upward trend, such as encouraging economic data, robust company profits, and the government’s proactive measures to promote economic expansion.

The durability and upward momentum of the market have also been greatly aided by continuous infrastructural investments and efforts meant to boost investor confidence.

In the meantime, interbank rates increased by six paisas, and the US dollar’s value saw a slight rise in the currency market. As a result of the current market conditions and the dynamic nature of foreign exchange swings, the dollar was quoted at Rs 278.45 in the interbank market.

Business

The investment plan for K-Electric will be audited every three months.

Published

2 hours ago

Farwa

In light of K-Electric’s inability to persuade NEPRA with its Rs. 484 billion investment plan, the regulatory body has decided to hold off on making changes to the utility’s Transmission & Distribution Investment Plan until FY 2030.

As stated in the order, the NEPRA will select the terms of reference (ToR) for the third-party audit in addition to announcing the quarterly audit. A report on the company’s investment plan’s progress will need to be submitted every quarter.

A performance report would also be required under the investment plan by K-Electric, Karachi’s only power distribution utility, according to the statement. A secure mechanism to avoid electrical mishaps was also mandated by the authority to the utility.

In the meantime, the power distribution firm stated in a statement that the investment plan will boost the utility’s infrastructure to meet present and future demands, decrease transmission and distribution losses, and increase customer base growth.

With investments totaling Rs. 544 billion, KE has been able to more than halve its T&D losses and quadruple its customer base and power consumption since privatisation, according to the statement.

A hearing in March 2023 was held to inform stakeholders about the projects that KE management had planned for FY2024–FY2030, and the statement claimed that the plan had been presented in compliance with regulatory requirements.

In terms of investment areas including expansion, energy loss reduction, network rehabilitation, maintenance, and safety, KE claimed to have clearly defined priorities and projects for this era.

The plan calls for the construction of transmission lines and grids, which will increase the dependability of KE’s network and make it possible to take on more electricity from the National Grid.

In order to manage the city’s needs through targeted investments and tech-based interventions, CEO KE Moonis Alvi said, “We are looking to invest $2 billion in Transmission and Distribution over the next 7 years.” The work of all the stakeholders who have contributed to this trip and who will help us modernise our infrastructure and get ready for the future is something I’d like to acknowledge.

The investment plan is a supplement to the business’s Power Acquisition Programme, which outlines KE’s goal of having 30% renewable energy in its generation mix by 2030. As part of its efforts to provide everyone with access to reasonably priced energy, the firm has also been granted regulatory permission for its RFPs for 640 MW of renewable projects.

Business

$399 million in airline revenue is being blocked by Pakistan. IATA

Published

3 hours ago

Farwa

Pakistan and Bangladesh have been urged by the International Air Transport Association (IATA) to promptly release airline profits that are being withheld in violation of international agreements.

“Airlines are unable to repatriate over $720 million ($399 million in Pakistan and $323 million in Bangladesh) of revenues earned in these markets, resulting in a severe situation,” an IATA statement stated.

“Money-denominated expenses like lease agreements, spare parts, overflight fees, and fuel must be paid for in a timely manner by repatriating revenues to their home countries.”

Delaying repatriation raises exchange rate risks for airlines and violates bilateral agreements’ international commitments. In order for airlines to effectively continue to offer the aviation connectivity that both of these countries depend on, Pakistan and Bangladesh must immediately release the more than $720 million that they are blocking, according to Philip Goh, Regional Vice President for Asia-Pacific at IATA.

Pakistan needs to make the difficult repatriation procedure less complicated. According to the statement, this presently includes the need to present audit certifications and tax exemption certificates, both of which create needless delays.

Approximately 425,000 jobs and $2.8 billion in economic activity were supported by Pakistan’s aviation industry prior to COVID-19. Passenger numbers are predicted to increase by more than 2.5 times by 2040 after returning to pre-COVID levels in 2023, according to the statement.