IMF projections

The fiscal tightening happened at the cost of economic growth which simply means loss of jobs, additional tax burden

While the incumbent government expects a 2.1% rise in economic growth rate in Pakistan during the ongoing fiscal year, the IMF estimates put it a just 1% — however better than half a percentage point growth rate that the World Bank has forecast about the country. The IMF also sees an elevated rate of inflation and rising unemployment during the ongoing fiscal year — something that people have already been experiencing, according to media reports.

Besides the one percent growth rate, the IMF’s World Economic Outlook-2020 projects average inflation rate in the country at 8.8%, current account deficit at 2.5% of GDP and rise in unemployment by 0.6% to 5.1% during the current fiscal year. All of these projections are is in sharp contrast with the economic targets set by the incumbent government, including 2.1% GDP growth rate, 6.5% inflation and 1.5% current account deficit. The last mentioned is something that has remained the main saleable item for the government in the realms of political rhetoric.

The Washington-based lending agency sees the economic growth rate recovering to 5% of GDP — but not until 2025. This means that the PTI-led government would not be able to reach the 5.5% growth rate — which the country had attained at the end of the fiscal year 2018 — during its entire tenure. From the 5.5% in FY18, the growth rate fell to 1.9% in FY19 and 0.38% in FY20.

While the economic stabilisation model that the incumbent government had adopted after taking charge in August 2018 may fix the financial imbalances in the long term, right now it is costing the common man dear. The fiscal tightening — carried out by the government by cutting down the volume of imports to tackle the current account deficit and putting a cap on spending to tackle the budget deficit — happened at the cost of economic growth which, for the common man, simply means loss of jobs and additional tax burden. To add to that came the coronavirus blow to the economy towards the end of the previous fiscal year, dashing any hope against hope. And now the government is faced with a Herculean task.

Published in The Express Tribune, October 16^th, 2020.

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