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No respite from inflation for another eight months

October 15, 2019
No respite from inflation for another eight months

Photo: Online

According to a World Bank report, inflation is expected to remain 13% throughout the fiscal year 2020. The donor bank also said that Pakistan’s economy will continue to slow down leading to unemployment and chances of job cuts.

The World Bank’s prediction exceeded the 11% – 12% inflation rate prediction by the State Bank of Pakistan earlier this year. This means that prices of everyday commodities such as fruits, vegetables and chicken are not expected to come down any soon.

In the most recent edition of its report, South Asia Focus: Making (De)centralization Work, the World Bank stated that Pakistan’s economic growth was expected to remain slow for the rest of 2019. The economic growth rate for FY 2020 is expected to be at 2.4%. This means that the country is in a recession right now, according to Pakistani economists. The percentage, however, is expected to rise higher to 3% next year.

The current account deficit (when the value of imports exceeds the value of exports) is expected to drop to 2.2% next year. “In Pakistan, the growth is projected to deteriorate this fiscal year as monetary policy remains tight and the planned fiscal consolidation will compress domestic demand,” the report said.

Budgetary or fiscal deficit (the government’s annual loss or gap between the government’s revenue and expenditure) is expected to reach 7.5% of the GDP in 2020 and remain above 6.2% in 2021. The report also said that imports would exceed exports due to the devaluation of rupee against the dollar that makes imports expensive and exports cheaper in the international market.

The next year is also expected to bring foreign investments into the country in the sectors of agriculture, art, and services.

The report stated that for the year ending June 30, 2020, public debt may rise to 82.9% of the GDP ($305 billion). The World Bank said that the increase in loans was due to the policies by the previous governments.

The report, however, also said that the price rise might get controlled by the next fiscal year, starting June 2020.

According to the WB, the economy is expected to perform better in the FY 2021-22, because of the IMF extended fund facility programme (EFF). According to the EFF programme, Pakistan can return this money in 10 years, at 3% which is approximately $180 million.

The report concluded that economic recovery in Pakistan depends largely on international oil prices, politics, and national security.

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