ADB says Pakistan to recover ‘modestly’ if it implements stringent economic reforms

ISLAMABAD: A leading international financial institution on Wednesday said Pakistan’s implementation of economic reforms for the next few months was crucial for macroeconomic stability and gradual recovery of growth in the South Asian state.
The Asian Development Bank (ADB) shared its assessment in a report dealing with the overall economic outlook of the region, saying that the country’s gross domestic product was expected to recover modestly to 1.9 percent in the ongoing fiscal year from last year’s 0.3 percent.
However, it warned of global price shocks and slow international growth amid Pakistan’s already challenging financial situation which led its leaders to seek a $3 billion bailout from the International Monetary Fund (IMF) earlier this year.
As the country witnessed rapid depreciation of national currency along with dwindling foreign exchange reserves, the IMF insisted it to carry out stringent economic reforms by eliminating subsidies, increasing power tariffs, and following market-driven exchange rate mechanism for its financial recovery.
“Pakistan’s economic prospects are closely tied to the steadfast and consistent implementation of policy reforms to stabilize the economy and rebuild fiscal and external buffers,” ADB Country Director for Pakistan Yong Ye said in a statement.
“Greater fiscal discipline, a market-determined exchange rate, and speedier progress on reforms in the energy sector and state-owned enterprises are key to reviving economic growth and protecting social and development spending,” he added.
The ADB acknowledged the country’s economic woes in the wake of last year’s floods that damaged crops and public infrastructure on a massive scale.
It also mentioned political instability as a negative factor and pointed out that inflation had remained on the rise in Pakistan.
The report maintained the implementation of the economic adjustment program and smooth general election within the next few months were expected to boost economic confidence, adding the easing of import controls was also going to support investment.
The ADB predicted that inflation was expected to cool down from 29.2 to 25 percent in the ongoing fiscal year, though sharp increases in energy tariffs under the economic adjustment program and any further weakening of the Pakistani rupee would keep the inflationary pressures elevated.