In Pakistan, people reach out to receive charity food. (Data map)
Islamabad:
A new report from the Asian Development Bank (ADB) shows that Pakistan has the highest cost of living in Asia, an inflation rate of 25%, and its economic growth rate is likely to be the fourth-lowest in the region at 1.9%.
The report was released Thursday in the Philippine capital, Manila.
Pakistan’s “Express Forum” reported that the “Asian Development Outlook” also painted a pessimistic picture for the next fiscal year. The inflation rate for the next fiscal year is expected to be 15%, again the highest among 46 countries, with a growth rate of 2.8 %. The fifth lowest in fiscal year 2024-25.
The Manila-based lender said Pakistan’s inflation rate this fiscal year is expected to be 25%, the highest in Asia. This makes Pakistan the most expensive country in Asia. Previously, the cost of living in Pakistan was the highest in South Asia.
The State Bank of Pakistan (SBP) and the federal government have set an inflation target of 21% for the current fiscal year, but despite the huge losses caused by the 22% interest rate, they will not be able to achieve this target.
The ADB said the country’s economic growth rate is likely to remain at 1.9% this fiscal year, ranking fourth lowest after Myanmar, Azerbaijan and Nauru.
Pakistan has been in a phase of stagflation for a long time, and the World Bank said last week that any adverse shock could lead to another 10 million people falling into a poverty trap. Approximately 98 million people in Pakistan already live in poverty.
In the past, the economic scenarios given by the ADB were quite optimistic and close to Pakistan’s official forecasts.
However, the latest ADB report noted that Pakistan will continue to face challenges arising from substantial new external financing needs and the rollover of old debt, which are exacerbated by tight global monetary conditions.
The Manila-based bank said political uncertainty affecting macroeconomic policymaking will remain a major risk to stability and the sustainability of reform efforts. The report said payments from multilateral and bilateral partners remain critical as Pakistan’s external financing needs are large and external buffers are weak.
“Further IMF support for the medium-term reform agenda would significantly improve market sentiment and facilitate affordable external financing from other sources,” the report added.
Finance Minister Mohammad Aurangzeb will meet International Monetary Fund Managing Director Kristalina Georgieva in Washington next week to request a new bailout package. The managing director of the International Monetary Fund said this week that Pakistan was discussing potential follow-up plans.
However, she said Pakistan still had “very important issues” to address: its tax base, how the richer segments of society contribute to the economy, how public spending should be directed and creating a more transparent environment.
The ADB said low confidence, soaring living costs and tighter macroeconomic policies under an International Monetary Fund program will dampen domestic demand in Pakistan.
The government aims to achieve a primary surplus of 0.4% of GDP in fiscal 2024 and an overall deficit of 7.5% of GDP, with a gradual decline in subsequent years, the report said. However, the World Bank said last week that Pakistan would not be able to meet both budget targets, The Express Tribune reported.
(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)
