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

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  • 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

Changes in the US dollar’s value are directly correlated with variations in gold prices.

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The price of 24-karat gold in Pakistan increased by Rs1500 on Thursday, reaching Rs231,000 per tola. This was another jump in the price of gold in the country.

Dealers reported a comparable surge in the price of 10 grams of 24-karat gold, which is currently trading at Rs198,045 after rising by Rs1285. In addition, the cost of ten grams of 22-karat gold increased significantly, trading at Rs 181,541.

These fluctuations are strongly correlated with shifts in the US dollar’s value, demonstrating the tight connection between gold prices and exchange rates. This emphasizes how local gold markets are impacted by variables related to the global economy.

At Rs2,580, the price of 24-karat silver remains steady right now. The price of gold increased significantly on a global scale as well, rising by $14 to $2,214 per ounce.

It’s critical to understand that changes in the worldwide market can have a substantial impact on gold prices in Pakistan throughout the day. The gold rates that are offered are obtained from reliable sources, mostly situated in Karachi and Multan.

It is recommended that individuals seek the advice of nearby gold merchants and jewellers for the most precise and current information regarding gold prices.

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Pakistan pledged to finish building the TAPI gas pipeline.

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The minister discussed the importance of the TAPI gas pipeline project for Pakistan’s energy needs during a meeting with Turkmenistan’s ambassador to Pakistan, Atadjan Movlamov.

The Minister was congratulated by Ambassador Movlamov on taking office and his commitment to the project was noted.

Dr. Musadik Malik thanked the ambassador for his kind words, acknowledged the support, and promised to maintain the two nations’ friendship. The intergovernmental commission and working group meetings for the project this year were briefed by Atadjan Movlamov.

He invited the Minister to attend the Turkmenistan Energy Forum, which would take place in Paris the following month.

TAPI undertaking
The project is for the construction of a 1,680-kilometer pipeline with a 56-inch diameter that can carry 3.2 billion cubic feet of gas per day (bcfd) from Turkmenistan through Afghanistan and Pakistan to the border between Pakistan and India.

According to the terms of the TAPI agreement, Afghanistan would receive its portion of 0.5 billion cubic feet of gas per day, while Pakistan and India will each receive 1.325 billion cubic feet of gas per day.

In order to carry out the Turkmenistan-Afghanistan-Pakistan-India (TAPI) gas pipeline project, Pakistan and Turkmenistan inked a cooperative implementation plan in Islamabad on June 4.

Prime Minister Shehbaz Sharif and a delegation from Turkmenistan, led by Minister of Energy and Water Resources Daler Juma’a, were present at the ceremony.

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The price of gold is still rising in Pakistan.

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According to the All Sindh Sarafa Jewellers Association, the cost of 10 grams of 24 karat gold grew by Rs. 86 to Rs. 196,760 from Rs. 196,674, while the cost of 10 grams of 22 carat gold jumped to Rs. 180,363 from Rs. 180,284.

The price of silver per tola and ten grams stayed at Rs. 2,211.93 and Rs. 2,580, respectively.

According to the Association, the price of gold on the global market rose by $7 to $2,200 from $.2,193.

It is important to note that Pakistani and IMF personnel have agreed at the staff level on the second and final review conducted as part of Pakistan’s Stand-By arrangement.

The International Monetary Fund (IMF) and Pakistan have reached a staff-level agreement on the second and final review of Pakistan’s stabilization program, which is supported by the IMF’s US$3 billion (SDR2,250 million) SBA Agreement. This is according to the official statement released by a team led by Nathan Porter.

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