Pakistan: Economic Boost Continues with 2.4% Growth in Fiscal Year, Key Factors Driving Recovery

Pakistan is experiencing a significant improvement in its economy, with the current fiscal year projected to have grown by 2.4 percent. This is a major advancement from the 0.17 percent contraction seen in the previous year. The government’s economic survey revealed this information just one day before the federal budget announcement, which aligns with the State Bank of Pakistan’s projection for the full year.

One of the key factors driving this growth is the government’s recent decision to lower its key interest rate by 150 basis points, marking its first rate cut in almost four years as part of efforts to stimulate economic growth. In addition, Pakistan’s current account deficit has also seen a notable improvement, narrowing by 95 percent to $200 million in the July to April period of the current fiscal year from $3.9 billion in the same period a year earlier.

The Finance Minister has mentioned that the current account recorded surpluses for three consecutive months until April, with the possibility of another surplus in May. The government is aiming for an economic expansion of 3.6 percent in the upcoming fiscal year, as economic activity picks up and continues to improve.

Despite these positive signs, Pakistan remains engaged in discussions with the IMF for a potential loan ranging from $6 billion to $8 billion to prevent a default in an economy that is growing at a sluggish pace compared to its regional peers. Prime Minister Shehbaz Sharif has emphasized the need for tough reforms to secure this loan and address issues such as high prices, unemployment, and a lack of new job opportunities that are putting pressure on his coalition government. Sharif’s administration has pledged commitment to implementing necessary reforms to address these challenges and secure long-term economic stability for Pakistan.