According to the World Bank’s new report in a growth in advanced economies like US will likely be slow to 0.5 percent in 2023, 1.9 points below June’s forecast, while the euro area is estimated to flatline as it battles harsh energy supply disruptions and price hikes related to Russia invasion. The report further predicted, China growth will enlarge to 4.3 percent in 2023, merely 0.9 points lower than the earlier forecast.
Through heavy debt burden and weak investment developing and emerging states are facing multi-year period of slow growth, the report said. Furthermore, it is also recorded in the report that Pakistan’s real GDP (Gross Domestic Product) in FY23 likely to rise at 2.0 percent, while worldwide growth in 2023 predicted to slow perilously close to recession, slashing its economic forecast on high inflation, growing interest rates and Russia’s invasion of Ukraine. WB’s latest forecast points to a sharp, long-lasting slowdown with growth pegged at 1.7 percent, approximately half of the pace it predicted in June, according to the bank’s latest Global Economic Prospects report. This is among the weakest rates seen in nearly three decades, overshadowed only through the pandemic-induced recession of 2020 and global financial crisis in 2009.
| Pakistan: Point Contribution At Constant Prices 2015-16 | |||
|---|---|---|---|
| Details | 2019-20 | 2020-21 | 2021-22 |
| A. Agriculture | 0.88 | 0.82 | 1.01 |
| B. Industry | (1.1) | 1.45 | 1.36 |
| Commodity Producing Sector (A+B) | (0.2) | 2.27 | 2.37 |
| C. Services Sector | (0.7) | 3.48 | 3.59 |
| GDP (GVA) | (0.94) | 5.74 | 5.97 |
Unfortunately our country is facing a harsh economic crisis and clearly needs external support. Foreign exchange reserves are at hazardously low levels, sufficient to pay for only a few weeks’ worth of imports. In decades inflation is at its highest levels, growth is sagging and to address a weak currency the central bank has grown interest rates sharply. Food and fuel prices are causing real pain to common people and the country’s economic issues are only exacerbated through the devastation wrought by the floods.
Pakistan’s economic crisis truly speaking has numerous causes. Weak governance and political unrest have been significant factors, weakening investor confidence in Pakistan and contributing to corruption and pork-barrel politics that undermine Pakistan’s fiscal position. The country is also highly import-dependent, mainly with regard to energy, which renders it acutely vulnerable to hikes in worldwide oil and gas prices. The pandemic did not assist, and Pakistan’s tense relations with India continue to deprive it of a potentially transformative trading and investment partner.
Pakistan is highly vulnerable to climate-linked disasters and cannot alone build a fortress against climate change. Stronger domestic preparedness and resilience are clearly needed, but ultimately Pakistan’s fortunes will hinge primarily on global progress to address the drivers of climate change.
As per WB report titled ‘Global Economic Prospects-January 2023’ released, Pakistan’s real GDP was half the pace that was anticipated last June. In Pakistan, an already precarious economic situation, with low foreign exchange reserves and large fiscal and current account deficits, was exacerbated last August by severe flooding, which cost many lives. Pakistan faces challenging economic situations, counting the repercussions of the present flooding and continued policy and political unrest, it said.
Sources recorded that the International Monetary Fund (IMF) has refused the circular debt management plan (CDMP) presented by the Government of Pakistan and asked the authorities to grow the electricity tariff by Rs12.50 per unit in order to restrict the extra subsidy at Rs335 billion for FY 2023. It is also said that during the second day of technical-level talks, the Washington-based lender termed the revised CDMP as unrealistic, which is consisted on certain wrong assumptions. So Pakistan will have to bring additional changes in its policy prescription to restrict the losses of the cash-bleeding power sector. Furthermore, IMF and Pakistan both will work out a gap on the fiscal front after which dissimilar extra taxation measures will be finalized by the upcoming mini-budget.
In last, I would like to mention here IMF funds would assist our country avoid default on its foreign obligations, which could have seismic results for its economy and its citizens. In this regards, replenishing foreign reserves is crucial. Furthermore, aid programs would also assist address the flood recovery, but this will be much more manageable if the country’s reserves grow to levels that instill confidence in its ability to pay its debts. For investments, there is intense need of creating an environment conducive. Further, the investment must be capable of significantly augmenting the share of GFCF in GDP also growing the efficiency to create additional welfare. Consumers as well as investors require to be convinced of a long term sustainable and inclusive growth project that inspires confidence in Pakistan’s economic future and that induces them to take initiatives in their own and in the country’s interest. Thus, well-functioning competitive markets is required.