The International Monetary Fund (IMF) has revised downward its growth projection for Pakistan in its recent World Economic Outlook Update. The report indicates a 0.5 percent reduction in the GDP growth rate estimate for the fiscal year 2024, now forecasted at 2 percent.
This downward revision is also reflected in the IMF’s adjustment to the GDP projection for the next fiscal year, which will decline by 0.1 percent to 3.5 percent. Notably, in October 2023, the IMF initially projected GDP growth for Pakistan at 2.5 percent in 2024.
Globally, the IMF forecasts growth of 3.1 percent in 2024, slightly higher than the October 2023 estimate, due to fiscal consolidation in the United States, several key emerging market economies, and China. However, this estimate is lower than the historical average (2000–19) of 3.8 percent.
The report emphasizes stable growth and decreasing inflation, suggesting a possible course for the world economy to take a soft landing. According to this, there are generally equal risks to global growth, and the chance of a hard landing is decreasing as a result of disinflation and steady growth.
It is recommended that policymakers control the inflation’s ultimate decline and adjust monetary policy in accordance with that trajectory. The IMF highlights that in order to restore budgetary capacity, generate revenue, and slow the growth of public debt, fiscal consolidation is necessary in many economies. Targeted structural changes are also advised to improve debt sustainability and productivity growth, which will aid in the convergence of income levels.
Among the downside risks that the IMF warns of are new, high commodity prices caused by geopolitical shocks, prolonged tight monetary conditions due to underlying inflation, and disruptive turns to tax hikes and spending cuts in many areas. The report also mentions potential problems such as deepening property sector woes in China, or the impact of global trade restrictions on economic activity.
The Finance Division’s data released on Monday showed that Rs 608.381 billion was borrowed from external sources and Rs 1,799.387 billion is borrowed domestically to finance the budget deficit. This internal borrowing, which included non-bank borrowing of Rs 251.611 billion and bank borrowing by Rs 2,050.998 billion, reflected an increase in foreign direct deposit (FDI) spending over three years.
The total expenditures amounted to Rs 9,261.764 billion, while total revenues stood at Rs 6,853.996 billion, resulting in a deficit of Rs 2,407.768 billion. The primary balance during this period was 1.7% of the GDP, amounting to Rs 1,812.211 billion.
Current expenditures of Rs 8,564.632 billion included various categories such as markup payments, Defence Affairs and Services expenditures, pension, running of civil government, subsidies, and grants to others.
Development expenditure under the Public Sector Development Programme (PSDP) for July-December 2023-24 was Rs 673.216 billion, comprising federal and provincial allocations.
Total revenue mobilization was Rs 6,853.996 billion, with tax revenue at Rs 4,834.306 billion and non-tax revenue at Rs 2,019.690 billion. The Federal Board of Revenue (FBR) tax contributed a significant portion to the tax revenue, along with the provincial share in tax collection.
During the first half-year of the current fiscal year, transfers were made to provinces out of gross revenue receipts, as per the data.