Rough days ahead for Pakistan’s economy

On Tuesday, the International Monetary Fund (IMF) released its World Economic Outlook report, which showed a reduced growth outlook for Pakistan’s fragile economy. The South Asian country’s growth rate for 2023 has been cut to 0.5% from 6% in 2022. The IMF also projected inflation rates of 27% for Pakistan this year, adding that the country’s unemployment rate is expected to continue to rise.

Pakistan’s coalition government is seeking to receive the key tranche of a $6bn bailout package signed in 2019 by Prime Minister Shahbaz Sharif’s predecessor, Imran Khan. However, Pakistan’s government must comply with the IMF’s austerity measures to secure the release of the $1.2bn portion of the deal, which has been stalled since December. Recently, the government has raised taxes and reduced subsidies to meet the bailout conditions, leading to an increase in food, gas and power prices.

Pakistan’s economy is still recovering from the destruction caused by floods last summer, which killed 1,739 people and caused $30bn in damages. The IMF warned that the country is at risk of defaulting, with increasing unemployment rates and a struggling economy. Meanwhile, Sharif’s government has come under criticism for the higher cost of food, and the Prime Minister has blamed Khan for mismanaging the economy during his tenure.

Khan, who is now the opposition leader, was deposed in a no-confidence vote last April. He has been leading rallies to force Sharif to agree to an early election, which is scheduled for later this year. Sharif’s administration is already struggling to deal with economic and political pressures, and the reduced growth forecast from the IMF’s latest report only adds to its woes.