Introduction
On Tuesday, Finance Minister Muhammad presented the Pakistan Economic Survey for the 2024 fiscal year, highlighting the economic stability achieved over the past year.
GDP Growth and Deficit Reduction
The nation's GDP is projected to grow by 2.38% compared to a contraction of 0.2% in the 2023 fiscal year. The current account deficit has been reduced to an estimated $200 million, down from a projected $6 billion.
Rise in Foreign Exchange Reserves
Foreign exchange reserves have increased to nearly $9 billion, a significant improvement from barely enough to cover 2 weeks of imports last June.
Primary Surplus and IMF Assistance
Additionally, the country has produced a primary surplus, reducing its fiscal deficit. R attributed the stability to the IMF standby agreement program. He emphasized that without the IMF's assistance, the situation would have been much worse.
Call for Continued IMF Support
He advocated for another bailout from the IMF, stating the nation will enter a new financial year on a stronger foundation. However, he did not address the heavy cost this fragile stability has imposed on the economy and people.
Exceeding IMF Projections
Pakistan's expected growth rate of 2.38% is slightly higher than the 2% projected by the IMF in April. This positive outlook led to many commendations during the economic survey release.
Efforts in Exchange Rate Stability
The Finance Minister praised the State Bank's efforts to stabilize the exchange rate, including cracking down on illegal currency transfers. He also noted significant growth in the agricultural sector, which helped boost the GDP growth rate to 2.38%, despite a 1% contraction in large-scale manufacturing.
Challenges and Sacrifices
However, achieving the stability came with sacrifices. A high current account deficit increases the demand for dollars, worsening the exchange rate and making debt servicing more expensive. Predictions suggest that the exchange rate could hit rupees 350 or higher.
Policy Measures and Consequences
To reduce the deficit by 87.5% to 0.5 billion, Trent measures were implemented, including a record high monetary policy rate of 22%, which reduced industrial investments. Some policies had unintended consequences, such as the 256% increase in imported cars, while the import of completely knocked-down kits decreased by 21%. On the consumer side, there was a 12% drop in infant food imports, indicating tough choices for families.
Conclusion
In summary, while Pakistan has made strides towards its economic stability, it has come at a significant cost to both the economy and its people.
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CSS Pakistan Affairs