With Pakistan’s fiscal deficit widening by more than 115 percent between July and October this year, the country’s Finance Ministry has forecast inflation in the South Asian nation to remain between 21 and 23 percent. .
“For fiscal year 23, economic growth is likely to remain below the budgeted target due to the devastation caused by the floods. This combination of low growth, high inflation, and low levels of official foreign exchange reserves are the main challenges for policy makers,” Pakistan’s Ministry of Economy said. Finance said in its Monthly Economic Update and Outlook on Friday, The Dawn reported.
The Economic Advisors Wing (EAW) of Pakistan’s Ministry of Finance prepared a report stating that from July to October 2022, the government’s fiscal deficit stood at 1.5% of GDP (Rs 1,266 trillion) in compared to 0.9% of GDP (Rs 587 billion) in 2021.
In the midst of such financial problems, the Pakistani government is facing the challenge of providing aid to the people in the flood-affected areas.
“The EAW report said that the average consumer price index (CPI) in the first five months (July-November) of fiscal year 23 stood at 25.1 percent compared to 9.3 percent in the same period last year.”CPI inflation is expected to rise. stay in the 21-23 percent range,” according to The Dawn report.
The Dawn report said: “The current account posted a deficit of $3.1 billion for July-November FY23 versus a deficit of $7.2 billion last year, mainly due to an improvement in the balance of commercial”.
The current account deficit narrowed to $276 million in November from $569 million in October.
Will Pakistan default on loans?
Despite such a downbeat economic picture of the country today, Pakistani Finance Minister Ishaq Dar said on Friday that “there is no way Pakistan is going to default”, referring to a series of loans the country has committed in the past to pay to multilateral financial institutions and countries.
“We are in a difficult position. We don’t have $24 billion in foreign exchange reserves left by our (last) government in 2016. But that’s not my fault. It’s the fault of the system,” Darr told investors at a ceremony to mark the listing of Pakistan’s first real estate investment trust scheme for development on the stock exchange, according to the Pakistan News Agency.
The Dawn in a recent report, quoted the State Bank of Pakistan as saying that the current Pakistani government avoided focusing on growth for fiscal year FY23, resulting in a drop in growth.
Despite sacrificing growth, the Pakistani government has failed to achieve price stability and financial stability, the bank said in its annual statement.
(With contributions from agencies)
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