By Asif Shahzad
ISLAMABAD (Reuters) -Pakistan’s central bank said on Friday GDP growth was likely to remain significantly lower for financial year 2022-23 than the previous year, with highly elevated inflation.
The forecast came in the bank’s half-year report, which said Pakistan’s macroeconomic conditions had deteriorated due to the global economic situation, uncertainty over an IMF programme, forex constraints, political instability and flash floods.
It gave no new figures for growth on Friday. In October, the bank revised GDP growth this fiscal year ending in June to 2%, down from the 5% estimated in the annual budget in June 2022.
This year, it said, growth will remain below the revised projection.
The International Monetary Fund (IMF) said in April that the figure would be 0.5%.
Pakistan is facing its worst ever economic crisis. Critical IMF funding needed to avert a balance of payment crunch has been delayed for months as the central bank’s reserves have shrivelled to cover only a month of controlled imports.
The central bank report said the contraction in federal development expenditures in keeping with the deterioration in Pakistan’s fiscal position had posed challenges for the FY23 economic outlook.
Pakistan posted highest ever inflation at 36.4% in April and its currency has depreciated to a historic low, after IMF talks began in February to stabilise its market-based exchange rate.
“Despite visible contraction in domestic demand, inflation … has remained stubbornly persistent,” the report said.
IMF conditions to resume funding stalled since November have included painful fiscal adjustments such as withdrawals of subsidies, increases in electricity, gas tariffs and oil prices, and arranging external financing.
The IMF has withheld disbursement of a $1.1 billion tranche of the $6.5 billion bailout agreed in 2019.
(Reporting by Asif Shahzad; editing by Toby Chopra, Andrew Heavens and Mark Heinrich)
