Uzair bin Farid

Pakistan will continue to face an 8% unemployment rate in the Fiscal Year 2024, according to the IMF projections, reports WealthPK. The unemployment rate will decrease from 8.5% in FY22-23 to 8% in FY24, which is still higher than the unemployment rate of 6.2% prevalent in FY22. The other economic indicators, like the Real Gross Domestic Product (GDP), also present a dismal picture according to the Fund projections. The Real GDP is expected to reach a 2.5% growth level in FY24 from the projected lower growth levels of -0.5% in FY23, according to the IMF data. There is, however, a mismatch in the projected data from the IMF and the Ministry of Finance, which has projected the GDP growth level to be around 0.29% for FY23. The average consumer prices for FY24 are projected to remain at 26%, whereas at the end of the period, the prices are projected to come down to 16.2% growth levels.

This represents a hopeful prospect, as a seething inflation has spelt trouble for the middle, lower-middle and low-income classes. A respite from inflation will introduce macroeconomic stability amid high volatility among the consumer groups that are dependent on monthly income and those which are responsible for the productive activity. There is, however, a catch here since Broad Money is projected to increase from 13.3% to 14.5%, which will add more liquidity in the money market. As more money seeps through the market, it will cause the aggregate demand to pull up. This will again lead to upward pressures on the prices and inflationary tendencies might sustain on the lower edge of the current intervals. The external sector will continue to face challenges, as foreign direct investment (FDI) is projected to decrease from 0.4% to 0.2% of GDP.

The gross foreign exchange reserves are projected to reach a high level of USD8.9 billion, which will still be lower than the foreign exchange reserve levels of FY22 when they were USD9.8 billion – a significant difference of USD 1 billion. Also, the total external debt will increase from 36.4% of GDP to 37.3% of GDP in FY24, which again indicates a bleak prospect for the future of the country. However, the general government and government-guaranteed debt, including the IMF obligations, is projected to decrease from 81.8% of GDP to 74.9%, which is a hopeful prospect, as previously the figure remained in the 80% interval for FY23 and FY22. The current account balance (CAB) for its part is projected to decrease from -1.2% of GDP to -1.8%, as import restrictions will be lifted under the market liberalization conditions of the new Stand-by Agreement (SBA) with the IMF.

The IMF Executive Board has already approved the “immediate disbursement” of SDR894 million to Pakistan under the new SBA, which amounts to USD1.2 billion. The remaining amount of the SBA will be transferred to the external account of Pakistan in a phased manner during the nine-month duration of the program, subject to “two quarterly reviews.” The projections for the new fiscal year by the IMF for Pakistan are a glaring reminder that Pakistan needs to undertake long overdue structural reforms in all sectors of economy to balance its books and be able to provide essential social and public services to its citizens.

Credit: INP-WealthPk