It is not so much that the International Monetary Fund’s forecasts for GDP growth and inflation are bad. Perhaps more worrying is that the latest estimates are revised, and that revision is downwards. In other words, the economy is in even deeper trouble than the IMF originally thought. The estimates are corresponding to the ones by the Asian Development Bank and the World Bank. That means that there is more less an agreement among the three institutions that are to lend to Pakistan. The IMF estimate is the most crucial, for IMF resumption of its programme will mean that Pakistan will be a virtual certainty for ADB and World Bank loans. However, the growth predicted for the current fiscal, of 0.5 percent, which is markedly lower than the already anemic 3.5 percent growth it predicted in October. This does reflect the impact of the floods last monsoon, but it must be seen with the prediction of inflation at 27 percent. The earlier inflation prediction was 20 percent.
The earlier predictions came after a fiscal 2023 with GDP growth of 6 percent and inflation of 12 percent. The economy is thus experiencing low growth and high inflation. Apart from the electoral implications, the picture is of an economy importing its inflation. This prediction is all the more worrying as it has lowered its headline global inflation forecast to 7 percent, compared to the 8.7 percent it recorded in 2023. The picture that emerges is of an economy at least in recession, if not out-and-out depression, where prices are not allowed to fall because of the hiking of interest rates by the State Bank. The result is stagflation, which is not a good place for the economy to be.
One problem that economies like Pakistan’s, dependent on imports of oil, edible oil and lifesaving medicines, is that they cannot recover without the world recovering. While the IMF has predicted a global GDP growth of 2.8 percent this year, growing slowly over the next five years to 3 percent, that does not jumpstart Pakistan’s exports. Pakistan is in the unfortunate position of having to export to survive, but not having enough to export. The only prospect for the future is in information technology. Even that is a future possibility rather than a present reality. However, too much store is being placed on traditional methods and monetarist methods. Policymakers are showing an intellectual bankruptcy as they pursue them, making them part of the problem, rather than of the solution.
