Economic reforms supported by IMF to increase growth in Pakistan: ADB

September 25, 2024 (MLN): The Asian Development Bank (ADB) on Wednesday said that the comprehensive economic reform program supported by the International Monetary Fund (IMF) is projected to increase growth and reduce inflation in Pakistan in FY2025.

In its September Outlook report, the lending agency noted that Pakistan’s economy expanded by 2.4% in FY2024, driven by higher consumption following the government’s economic stabilization and reform program.

It said that growth is projected to further improve to 2.8% in FY2025, supported by a revival in private investment.

However, with Pakistan’s sizeable external financing requirements, its economic outlook is vulnerable to any shortfall in external inflows, making timely disbursements from multilateral and bilateral partners crucial, it stressed.

In July 2024, the IMF and Pakistan reached a staff-level agreement on a 37-month Extended Fund Facility (EFF) arrangement worth about $7 billion that should catalyze significant international financial support for the underlying economic stabilization and reform program.

Once approved by the IMF Executive Board, the arrangement should enhance macroeconomic stability, it said.

The program aims to consolidate public finances, expand social spending and protection, rebuild foreign exchange reserves, reduce fiscal risks from state-owned enterprises, and improve the business environment to encourage growth led by the private sector.

The ADB further noted that Pakistan’s inflation slowed to 23.4% in FY2024 mainly on lower food inflation resulting from higher agriculture production.

"Inflation in 2025 is expected to moderate to 15.0%, supported by a tighter monetary policy and more stable global commodity prices," it noted.

Moreover, ADB said public debt is forecast to decline as a percent of GDP in 2024, but warned that risks remain as interest payments rose to close to 60% of fiscal revenues.

ADB further said that Pakistan made progress in reestablishing a market-determined exchange rate. General elections in February 2024 brought in a new coalition government in March 2024, alleviating political uncertainty that had prevailed since the start of the fiscal year.

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