Ajit Karn
According to report Pakistan Development Update, the World Bank warns Pakistan of grave threats to its economic and debt viability.
Media reported that the World Bank has stated that various economic disruptions have caused nearly four million Pakistanis to fall into poverty this fiscal year. In addition, the World Bank urged Pakistan to promptly arrange for new foreign loans in order to avoid a “public debt crisis.”
According to report ‘Pakistan Development Update,’ the World Bank warns Pakistan of grave threats to its economic and debt viability, while predicting almost flat economic growth and an average inflation rate of 29.5% for the current fiscal year.
The future of Pakistan is also “extremely uncertain,” with only 0.4% economic development anticipated this year and 2% for the following fiscal year. According to a media report, the annual inflation rate will be significantly higher than the projected average inflation rate of 29.5% for the fiscal year 2023 and 18.5% for the coming year.
According to the World Bank, implementing the macroeconomic and structural reforms stipulated by the International Monetary Fund (IMF) programme and securing the desperately required external refinancing are crucial for restoring macro-stability and confidence and preventing a “public debt crisis.”
According to media, the World Bank’s statement reflects mounting unease among international creditors regarding Pakistan’s approach to the IMF. During FY23-FY25, Pakistan’s external financing requirements are estimated to average USD 28.9 billion per year, or 8% of GDP, including IMF repayments, maturing Eurobonds, and repayments against Chinese commercial loans. However, it is anticipated that Pakistan’s reserve position will progressively improve.
The Country Director of the World Bank, Najy Benhassine, stated that the IMF program is an anchor for reforms in the current environment. He emphasized that the writing of the Pakistan Development Update report was not a simple task.
The World Bank has criticized the Pakistani government’s decision to institute import restrictions, which has significantly eroded public trust. The government has taken ad hoc administrative measures to preserve scarce foreign exchange reserves, but these measures have eroded consumer and investor confidence, according to the report.
According to media, the private sector activity has been affected by import and dollar outflow controls, higher borrowing and fuel costs, and sustained policy uncertainty, resulting in a sharp slowing of growth.
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Maintaining stability and laying the groundwork for a medium-term recovery, according to the World Bank, requires the Pakistani government to uphold IMF program reforms and adhere to prudent macroeconomic management. To restore investor confidence, it was stated that all import and dollar outflow restrictions must be lifted.
