pakistan economy projected to achieve 2.1% growth by 2024
Published on: December 7, 2023.
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Pakistan’s Economy to Rebound in 2024, IMF Loans and Political Stability Key Factors
Pakistan’s economy is poised to make a strong recovery in the coming years, with the Gross Domestic Product (GDP) expected to grow by 2.1% in the fiscal year 2024. This growth comes after a contraction of 0.17% in the previous year, according to a report by Bloomberg. The report also projects an acceleration of the growth rate to 4.8% in the fiscal year 2025.
Several factors are expected to contribute to Pakistan’s economic recovery. One of these factors is the approval of a preliminary loan tranche of $700 million from the International Monetary Fund (IMF). This loan will help boost foreign exchange reserves and prevent debt default. Furthermore, negotiations for a new longer-term deal with the IMF are likely to take place once the current program concludes in March 2024.
Additionally, the easing of supply bottlenecks and an increase in imports of raw materials and machinery have contributed to a 3.2% growth in Pakistan’s economic activity between June and October 2023. These factors have helped uplift the economy and create a more favorable business environment.
The State Bank of Pakistan (SBP) is expected to play a crucial role in driving economic growth. The SBP is likely to begin cutting its key policy rate from March 2024 as inflation slows down. Bloomberg forecasts that the SBP will reduce rates by 700 basis points, reaching 15% by the end of 2024. This reduction in interest rates will stimulate investment and encourage economic activity.
Furthermore, Pakistan’s farming sector is set to perform better in 2024 following an increase in the cultivation area for major crops such as rice, cotton, and maize. Compared to the previous year when floods damaged the crops, this increase is expected to boost agricultural output and contribute to overall economic growth.
The upcoming general elections in February 2024 also hold the potential to bring about greater political stability and investor confidence. A stable political environment is crucial for sustained economic growth and attracts both domestic and foreign investment.
However, the report does highlight some challenges that could hinder the growth outlook. High taxes, fuel and energy bills, debt servicing costs, and potential disruptions to the IMF aid or the elections are all factors that could impact the economic recovery. It is important for the government and relevant stakeholders to address these challenges effectively to ensure a smooth growth trajectory.
In conclusion, Pakistan’s economy is on the path to recovery, with positive projections for the coming years. IMF loans, easing supply bottlenecks, rate cuts, and political stability are key factors contributing to this upward trend. While challenges persist, addressing them will be essential to maintain the momentum and achieve sustainable economic growth.
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