WB Slashes Pakistan’s GDP Projection To 1.7pc For FY 2023-24

‘It was difficult to undertake tax reforms as the political elites have a strong influence over tax policy’

WB Slashes Pakistan’s GDP Projection To 1.7pc For FY 2023-24

According to projections from the World Bank (WB), Pakistan's GDP would rise by 1.7% in the current fiscal year as opposed to the official objective of 3.5%, and inflation may increase to 26.5% as opposed to the official predictions of 21.5%.

In addition, the WB predicts a primary deficit of negative 0.4% of GDP, which is higher than the official objective of 0.4% set with the IMF.

In addition, the international lender has ruled out the prospect of debt restructuring or modifying the criteria to include Pakistan in the group of Highly Indebted Poor Countries (HIPC) and has instead warned Islamabad against a growing debt burden that may increase to 89.3% of GDP until FY2027.

The international lender also noted that it was challenging to implement tax reforms since political elites who serve in the executive/cabinet, parliament, political parties, finance ministers, cabinet committees, and standing committees had a significant impact on tax policy.

The bank suggested that Islamabad eliminate subsidies, streamline spending, and enhance taxation policies in order to lower the budget deficit by Rs2.723 trillion a year. It also made clear how dependent the country's macroeconomic outlook is on the successful execution of reforms.

“The continuation of the FY24 budget and IMF-SBA agreement, a consistent fiscal and monetary policy mix, a market-determined currency rate, and lessened political and policy uncertainty are all necessary for macroeconomic stability in the short term.”

The WB said, "Pakistan faces a number of downside risks, including high liquidity risks and low foreign reserves, an unstable political environment, and external shocks."

The public and publicly guaranteed debt (PPGD) might increase to 89.3% of GDP by FY27 in unfavorable conditions. The World Bank's study titled "Pakistan Development Update: Restoring Fiscal Sustainability" was issued here on Tuesday at a news conference from Washington, DC, and the Bank's office in Islamabad. It states that Pakistan's PPGD is very vulnerable to exchange rate or interest rate shocks.

Najay Benhassine, the country chief for the World Bank, stated that the anticipated dollar inflows from the bank may decrease from over $2 billion in the previous fiscal year to about $1.5 or $1.6 billion, including the potential for a $350 million program loan under RISE-II for the current fiscal year.