Pakistan: The inflation rate in the cash-strapped country can rise to 29.5 percent in the fiscal year because of higher energy and food prices and the weaker rupee. Pakistan’s government is also set to hike the prices of petroleum products by Rs 10-14 per litre during the next fortnight, further burdening the people who are hit by skyrocketing inflation, a media report said on Saturday.

The Worl Bank has warned Pakistan of the inflation rate. However, the World Bank report on the macro poverty outlook for Pakistan said inflation was expected to moderate over the forecast horizon as global inflationary pressures dissipated.

Agricultural output was expected to contract  

It said GDP growth was expected to “slow sharply to 0.4 percent” in the fiscal year 2023 reflecting corrective tighter fiscal policy, flood impacts, high inflation, high energy prices and import controls, Dawn reported. It added that agricultural output was also expected to contract for the “first time in more than 20 years” due to last year’s catastrophic floods.

“Industry output is also expected to shrink with supply chain disruptions, weakened confidence and higher borrowing costs and fuel prices. The lower activity is expected to spill over to the wholesale and transportation services sectors, weighing on services output growth,” the report reads.

 Output growth was expected to gradually recover in FY 2024 and 2025

It said that output growth was expected to gradually recover in the fiscal year 2024 and 2025 but “remain below potential” as low foreign reserves and import controls continue to curtail growth, Dawn reported. It added that poverty in Pakistan will inevitably increase with pressures from weak labour markets and high inflation, warning that further delays in external financing, policy slippages, and political uncertainty poses significant risks to the macro poverty outlook for the country.

In the absence of higher social spending, the lower middle-income poverty rate is expected to increase to 37.2pc in the fiscal year 2023. “Given poor households’ dependency on agriculture and small-scale manufacturing and construction activity, they remain vulnerable to economic and climate shocks,” the report added. The lower activity is expected to spill over to the wholesale and transportation services sectors, weighing on services output growth, Dawn reported.

Current account deficit is projected to narrow to 2pc of GDP

With dampened imports, the current account deficit is projected to narrow to 2pc of GDP in the fiscal year 2023 but widen to 2.2pc of GDP in the fiscal year 2025 as import controls ease. The fiscal deficit is projected to narrow to 6.7pc of GDP in the fiscal year 2023 and further over the medium term as fiscal consolidation takes hold. The macroeconomic outlook is predicated on the completion of the IMF-EFF programme, sound macroeconomic policy, continued structural reforms and adequate external financing, Dawn reported.

(with inputs from ANI)

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