ISLAMABAD: The International Monetary Fund has projected slower economic growth and higher inflation for Pakistan, highlighting the need for continued monetary discipline, exchange rate flexibility and stronger financial-sector stability.
The IMF said Pakistan’s GDP growth is expected to stand at 3.6 percent this year before easing to 3.5% next year.
According to the IMF, Pakistan’s economic growth rate is likely to remain below the government’s target for the current fiscal year. The government has set a GDP growth target of 4.2%, while the IMF expects growth to reach 3.6% this year.
The Fund projected that GDP growth would further slow to 3.5% next year.
Inflation expected to rise next year
The IMF estimated average inflation at 7.2% this year. However, inflation is expected to increase to 8.4% next year, signaling renewed pressure on household costs.
The report also forecast overall inflation at 11.5% this year.
Unemployment likely to ease
Unemployment is projected at 6.9% this year. The IMF expects the unemployment rate to decline slightly to 6.5% next year, offering some relief amid slower economic activity.
The IMF said Pakistan’s primary balance is likely to remain at 2% this year and next year. However, the budget deficit is expected to increase from 3.2% to 3.4%.
The projection points to continued pressure on public finances despite efforts to stabilize the economy.
State Bank policy focused on inflation control
The IMF said the State Bank of Pakistan maintained a tight monetary policy through timely measures. According to the Fund, the central bank’s policy stance is aimed at controlling inflation and keeping price expectations in check.
The IMF also advised continued monitoring of possible pressure on household prices and wages.
The IMF said exchange rate flexibility is important for protecting the economy against external shocks. It added that Pakistan must continue rebuilding its foreign exchange reserves to strengthen economic stability.
The Fund also called for further expansion and reforms in the foreign exchange market.
Banks must maintain adequate capital
The IMF stressed that banks must maintain adequate capital to ensure financial stability. It said a well-capitalized banking sector is essential to support confidence and protect the financial system from possible risks.
