Goldman Sachs, IMF predict lower interest payments in Pakistan

March 07, 2024 (MLN): Goldman Sachs and the International Monetary Fund (IMF) expect interest payments as a share of GDP in Pakistan to fall meaningfully as inflation and rates normalize and the debt-to-GDP ratio to fall substantially.

The IMF estimates the ratio to have peaked in 2020 and that it will fall towards 63% of GDP by 2028.

Goldman Sachs thinks that the realistic modal forecast for Pakistan’s fiscal trajectory is constructive. This is not to say that there are no risks.

The revenue base of the country remains limited, undermining the potential to fund the spending that, on our estimates, is required on many services, and the main risk is that current and past spending patterns are not sustainable in the long run.

Fundamentally, the entity believes that the most important risk is the lack of growth.

GDP per capita has grown by only 1.6% annually in the last 20 years, and exports in particular have grown by less than 1% in real terms over the same period, well below the EM average.

In fact, the country has increasingly relied on the export of human capital to support domestic demand, a trend that in our view does not support long-term growth prospects.

The risks are, therefore, more long-term and dependent on structural policy, rather than short-term and cyclical.

Copyright Mettis Link News