Over the next few years, Pakistan is probably going to be stuck in low-growth mode. According to foreign lenders, the nation’s economic growth will stay muted and will likely range from 1.8 to 3.5 percent over the medium term due to falling investment, ongoing fiscal and external imbalances, and a significant state role in the sector.
Pakistan’s economy is expected to grow by 2 percent this year and 3.5 percent the next, according to the IMF’s flagship World Economic Outlook 2024, which was released on the eve of the World Bank Group’s spring meetings. Based on the Fund’s recently completed assessment of Pakistan’s macroeconomic situation under the $3 billion Stand-by Arrangement, the estimations have been made. Even these estimates are contingent upon more budgetary contraction and a fresh bailout from the IMF. It makes sense that Muhammad Aurangzeb, the finance minister, is in Washington to advocate for a more expansive, three-year fund programme worth $6–8 billion to assist the proposed economic reforms.
The nation would ask for a three-year programme “to help execute the structural reform agenda,” as he noted. He claimed that market mood was more optimistic in the current fiscal year, citing decreased market volatility and economic stabilisation brought about by the SBA. “We have started the conversation with the Fund to enter into a larger and longer programme primarily for that reason,” he clarified.
In the event that it is authorised, Pakistan will have worked with the IMF 24 times since 1958. Will this new initiative end the “chain of financial struggles and bailouts” that the minister reportedly mentioned?
The truth is that Pakistan has never been able to finish a lengthier plan with the Fund due to political reasons causing a policy aim to be broken. What will this time around be different? Thus far, the minister has demonstrated an appreciation of the problems that have hindered the economy and a firm resolve to carry out long-overdue structural reforms without any caveats. He said during an Atlantic Council meeting, “Unfortunately, we will still be looking at another programme if we do not get through the structural reforms. He stated that Pakistan does not need “too many policy prescriptions” and that he understands what has to be done. The nation is aware of the issues and what has to be done to stabilise the economy. Implementation and follow-through are a hurdle. The budget for the upcoming year will likely show how resolute the administration will be in implementing changes and how Mr. Aurangzeb strikes a balance between stabilisation and comparatively higher growth at a time when the economy is experiencing its worst crisis.
In contrast to his predecessors, Mr. Aurangzeb plans to talk to the IMF about the “growth aspects” of the project. He hasn’t, however, provided specifics on how he intends to expand the economy without going against the program’s policy directives, which must centre on strict stabilisation measures.