Asian Development Bank sees Pakistan’s growth slowing to 3.9 percent

In this file photo, garments are seen on sale by streetside vendors in Saddar Bazaar, a neighborhood of Karachi, on March 15, 2010. (AFP)
Updated 03 April 2019

Asian Development Bank sees Pakistan’s growth slowing to 3.9 percent

  • The government had been targeting growth of 6.2 percent
  • Foreign exchange reserves will likely remain stressed at the end of 2019

KARACHI: Pakistan’s economic growth is set to slow to 3.9 percent in the 2019 fiscal year, the Asian Development Bank said in data published on Wednesday.
The government, which has been holding discussions with the International Monetary Fund over a possible bailout, had been targeting growth of 6.2 percent, but there have been growing expectations among economists of a slowdown.
Last month, the State Bank of Pakistan said economic growth was set to slow to between 3.5-4.0 percent in the 2019 fiscal year from 5.2 percent in 2018, with a fiscal deficit of 6.0-7.0 percent.
“GDP growth is forecast to decelerate further to 3.9% in FY2019 as macroeconomic challenges continue and despite steps to tighten fiscal and monetary policies to rein in high and unsustainable twin deficits,” ADB said. “Continued fiscal consolidation in FY2020 will keep growth subdued at 3.6%.”
The report said the supply side was already showing signs of a slowdown and agriculture was expected to underperform the 3.8 percent growth target for fiscal 2019 after water shortages struck as wet season crops were being sown. Large-scale manufacturing reversed 6.6 percent growth in the first half of the year to decline by 1.5 percent as domestic demand contracted and rising world prices crimped demand for raw materials.
Faced with the prospect of a balance of payments crisis, the government of Prime Minister Imran Khan has stepped up efforts to shore up its foreign exchange reserves and attract more foreign investments.
It has secured funding and credit arrangements from Saudi Arabia, the United Arab Emirates and China, some of which have already been booked and some of which is expected in the second half of the year.
The ADB report said inflation is expected to rise sharply to average 7.5 percent, driven up by continued heavy government borrowing from the central bank, hikes to domestic gas and electricity tariffs, further increases in regulatory duties on luxury imports, and the lagged impact of currency depreciation by more than 10.7 percent since July 2018.
Lower revenue collection and higher current expenditure pushed the budget deficit from the equivalent of 2.3 percent of GDP in the first half of 2018 to 2.7 percent a year later, the ADB said.
According to ADB, the current account deficit is expected to ease in FY2019 but will remain high at the equivalent of 5 percent of GDP because of the large trade deficit. It will narrow further to 3 percent in FY2020 with easing macroeconomic pressures on the external accounts.
Foreign exchange reserves, depleted to $8.1 billion in February 2019, will likely remain stressed at the end of 2019.


Biden announces return to global climate accord, new curbs on US oil industry

Updated 21 January 2021

Biden announces return to global climate accord, new curbs on US oil industry

  • Biden has promised to put the United States on a track to net-zero emissions by 2050

WASHINGTON: US President Joe Biden on Wednesday announced America’s return to the international Paris Agreement to fight climate change, the centerpiece of a raft of day-one executive orders aimed at restoring US leadership in combating global warming.
The announcements also included a sweeping order to review all of former President Donald Trump’s actions weakening climate change protections, the revocation of a vital permit for TC Energy’s Keystone XL oil pipeline project from Canada, and a moratorium on oil and gas leasing activities in the Arctic National Wildlife Refuge that Trump’s administration had recently opened to development.
The orders by the newly sworn-in president will mark the start of a major policy reversal in the world’s second-largest greenhouse gas emitter behind China, after the Trump administration pilloried climate science and rolled back environmental regulation to maximize fossil fuel development.
Biden has promised to put the United States on a track to net-zero emissions by 2050 to match the steep and swift global cuts that scientists say are needed to avoid the most devastating impacts of global warming, using curbs on fossil fuels and massive investments in clean energy.
The path will not be easy, though, with political divisions in the United States, opposition from fossil fuel companies, and wary international partners concerned about US policy shifts obstructing the way.
“We got off track very severely for the last four years with a climate denier in the Oval Office,” said John Podesta, an adviser to former President Barack Obama who helped craft the 2015 Paris Agreement. “We enter the international arena with a credibility deficit.”
Biden’s orders also require government agencies to consider revising vehicle fuel efficiency standards and methane emissions curbs, and to study the possibility of re-expanding the boundaries of wilderness national monuments that had been reduced in size by the Trump administration.
While environmental advocates were thrilled by the orders, industry groups and conservatives criticized them.

Alaska’s Republican Governor Mike Dunleavy mocked Biden’s decision to shut down oil and gas work in the Arctic National Wildlife Refuge, saying the new president “appears to be making good on his promise to turn Alaska into a large national park.”
The American Petroleum Institute, the nation’s top oil and gas industry lobby group, meanwhile, said it believed blocking the Keystone XL oil pipeline was a “step backward.”
“This misguided move will hamper America’s economic recovery, undermine North American energy security and strain relations with one of America’s greatest allies,” API President Mike Sommers said.
Global counterparts and climate advocates welcomed Washington’s return to cooperation on climate change, but expressed some skepticism about its staying power and its ability to overcome domestic political turmoil.
Trump withdrew the United States from the 2015 Paris deal late last year, arguing it was too costly to the US economy.
“The United States continues to be the one and only country that has withdrawn from the Paris Agreement, making it, frankly, the pariah of this multilateral agreement,” former UN climate chief Christiana Figueres, told Reuters.
Biden can regain US credibility by “doing the domestic homework” of ambitious climate action at home.
Brian Deese, Biden’s director of the National Economic Council, told Reuters that the United States hopes to encourage other big emitters to also “push their ambition, even as we have to demonstrate our ability to come back on the stage and show leadership.”
Pete Betts, an associate fellow at London-based think tank Chatham House who led climate negotiations for the European Union when the Paris deal was struck, said the United States will need to match its promises with financial commitments too.
The United States under Obama pledged to deliver $3 billion to the Green Climate Fund to help vulnerable countries fight climate change. It has delivered only $1 billion so far.
“The US will need to put some money on the table, and also encourage others to do the same,” he said.