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WB cuts Pakistan’s GDP forecast on rising rates, limited fiscal space

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2 years ago

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  • World Bank expects economy to grow 0.4% in current year.
  • Bleaker forecast assumes agreement is reached with IMF.
  • World  Bank lowers regional growth forecast to 5.6%.

The World Bank sharply lowered Pakistan’s current-year growth forecast, saying the country’s economic growth prospects have weakened due to tighter financial conditions and limited fiscal space.

The World Bank now expects Pakistan’s economy to grow 0.4% in the current year, from its October forecast of 2% growth. The bleaker forecast assumes an agreement is reached with the International Monetary Fund for bailout funds, it said.

Pakistan’s fiscal year starts in July and runs through June. Pakistan expects its economy to grow 2% in FY23, however, the country’s central bank chief said in January the growth forecast could face downward pressure.

The South Asian nation has been in economic turmoil for months with an acute balance of payments crisis while talks with the IMF to secure $1.1 billion in funding as part of a $6.5 billion bailout agreed upon in 2019 have not yet yielded fruit.

Lower economic output and high prices in Pakistan have led to stampedes and looting at flour distribution centres set up across the country.

“Elevated global and domestic food prices are contributing to greater food insecurity for South Asia’s poor who spend a larger share of income on food,” the bank said.

The World Bank lowered its 2023 regional growth forecast to 5.6% from 6.1% in October.

“Rising interest rates and uncertainty in financial markets are putting downward pressure on the region’s economies,” the report said.

Most countries have raised interest rates at a rapid pace since the war in Ukraine last year led to choking supply chains and stoked inflation globally.

The World Bank forecast Sri Lanka’s economy will contract by 4.3% this year, reflecting the lasting impact of the macro debt crisis, with future growth prospects heavily dependent on debt restructuring and structural reforms.

Sri Lanka follows the calendar year. In January, President Ranil Wickremesinghe said Sri Lanka’s economy could contract by 3.5% or 4.0% in 2023 after shrinking by 11% last year.

Inflation in South Asia is set to fall to 8.9% this year, and to below 7% in 2024, the World Bank said.

The World Bank also lowered its forecast for India’s economic growth in the current fiscal year that started on April 1 to 6.3% from 6.6% as it expects higher borrowing costs to hurt consumption.

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Irfan Siddiqui meets with the PM and informs him about the Senate performance of the parliamentary party.

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The head of the Senate’s Foreign Affairs Standing Committee and the PML-N’s parliamentary leader paid Prime Minister Muhammad Shehbaz Sharif a visit in Islamabad.

Senator Irfan Siddiqui gave the Prime Minister an update on the Parliamentary Party’s Senate performance.

Additionally, Senator Irfan Siddiqui gave the Prime Minister an update on the Senate Standing Committee on Foreign Affairs’ performance.

He complimented the Prime Minister on his outstanding efforts to bring Pakistan’s economy back on track and meet its economic objectives.

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Business

SIFC Increases Direct Foreign Investment: Investment in the Energy Sector Rises by 120%

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The Special Investment Facilitation Council is intended to help Pakistan’s energy sector attract $585.6 million in direct foreign investment in 2024–2025. The amount invested at the same time previous year was $266.3 million.

This is a notable 120% rise, mostly due to investments in gas exploration, oil, and power. Such expansion indicates heightened investor confidence and emphasizes the development potential in important areas.

The State Bank reports that foreign investment in other vital industries has increased by 48% to $771 million.

This advancement is a blatant testament to SIFC’s efficient investment procedure and quick project execution.

The purpose of the Special Investment Facilitation Council is to establish Pakistan as an investment hub by aggressively promoting regional trade and investment in the energy sector and other critical industries.

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Business

Discos report losses of Rs239 billion.

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When compared to the same period last year, the data indicates that discos have decreased their losses in the first quarter of the current fiscal year.

The distribution businesses recorded losses of Rs239 billion in the first three months of the current fiscal year, a substantial decrease from the Rs308 billion losses sustained during the same period the previous year.

Additionally, the distribution businesses’ rate of recovery has improved. It has increased to 91% in the first quarter of this year from 84% in the same period last year, indicating success in revenue collection.

Regarding circular debt, the Power division observed a notable change. Last year, between July and October, the circular debt grew by Rs301 billion. Nonetheless, this year’s first four months saw a relatively modest increase in circular debt, totaling about Rs11 billion.

These enhancements show promising developments in the electricity sector’s financial health in Pakistan, where initiatives are being made to accelerate recovery rates and slow the expansion of circular debt.

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