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A.I generated |
In a recent report, the Asian Development Bank (ADB) has painted an optimistic picture of Pakistan’s economic outlook for the ongoing fiscal year. The ADB noted that key indicators suggest improvement, particularly in terms of inflation and macroeconomic stability. However, the country’s economic progress remains contingent upon the government’s consistent pursuit of reform-oriented policies and its ability to manage several internal and external challenges.
### Positive Growth Projections
According to the ADB’s latest economic outlook, Pakistan’s economy is expected to grow by 2.4% in fiscal year 2024. Looking ahead to fiscal year 2025, the bank has projected a slightly higher growth rate of 2.8%. While modest, these figures indicate an upward trend compared to the previous fiscal period, where economic growth was stagnant due to multiple internal and global shocks, including inflationary pressures, political instability, and the ongoing impact of the global pandemic.
A key condition for realizing this growth, however, is the government’s ability to maintain a consistent and transparent reform agenda. This includes curbing government expenditures, improving fiscal management, and incentivizing private sector participation. These reforms, if followed through, could help revive investor confidence and stimulate domestic economic activity, both crucial to sustaining this projected growth trajectory.
### Inflationary Pressures Easing
Inflation has been a central concern for Pakistan’s economic policymakers, particularly in the wake of global price shocks and local currency depreciation. The report highlights that inflation, which soared to a staggering 29.2% in 2023, has since moderated to 23.4% in 2024. While still high, this reduction marks a significant achievement, as inflationary pressures have been one of the leading factors in reducing the purchasing power of ordinary citizens and raising the cost of doing business in the country.
The ADB attributes the decline in inflation to a combination of better monetary policy management and stabilization of the exchange rate. It further forecasts that inflation will continue to decline, potentially dropping to 15% by fiscal year 2025. This outlook aligns with the positive developments seen in other economic indicators, such as interest rates, which have also begun to fall, reflecting improving economic stability.
### Challenges and the Road Ahead
While the ADB’s outlook provides hope, the bank also stressed that this growth remains fragile and dependent on several critical factors. One of the most pressing concerns is the country’s ability to adhere to the International Monetary Fund (IMF)’s stringent conditions. Prime Minister Anwaar ul Haq Kakar recently acknowledged that the government has already met some of the IMF’s requirements, which included financial obligations involving China.
Overall, while the ADB’s report provides an optimistic forecast for Pakistan’s economy, significant challenges remain. The government’s ability to implement and maintain reform-driven policies, reduce fiscal deficits, and foster private sector development will be essential for Pakistan to fully capitalize on these positive economic trends.