Pakistan faces a setback at the economic front
External financing could be compounded by difficulties, for Pakistan, in rolling-over bilateral debt from non-traditional donors and tighter international financing conditions, given the “anemic” economic outlook of Pakistan, with a growth rate of just 0.5% in the current fiscal year, as per the World Bank’s biannual flagship report “the South Asia Economic Focus”, released on Thursday.
According to the World Bank’s report on South Asia, the regional growth was expected to rebound at 4.5 percent in the fiscal year 2020-21 (FY21) against negative 7.7 percent in the last fiscal year 2020. The country-wide projections show Afghanistan’s growth at 2.5 percent, Sri Lanka at 3.3 percent, Bangladesh at 1.6 percent, and India 5.4 percent in FY21.
The half-a-percentage economic growth rate projected for Pakistan is far below the official target of 2.1% that the incumbent PTI government had set for its third year in power. As per the World Bank’s forecast, Pakistan’s economic outlook is expected to remain fragile for at least two years, accounting for the economic impact caused by the outbreak of the coronavirus pandemic.
Services sector growth is expected to remain weak, which is likely to directly impact the vulnerable households who rely heavily on jobs. This is likely to worsen the already high poverty rates. The pandemic is also expected to exacerbate Pakistan’s human capital challenges.
Private consumption is also projected to fall precipitously in Nepal, Pakistan, Sri Lanka, and Bangladesh, where remittances are a large share of income. For Pakistan specifically, the remittances may plunge by 8.8% in 2020 and if the international crisis worsens, there will be an 11.1% decline in remittances.
The report also predicted the worsening of current account deficit, budget deficit, and public debt in the current fiscal year 2020-21 for the region. “The news is not good and the outlook is dire for South Asia,” World Bank Chief Economist for South Asia region Hans Timmer said in his opening remarks given through audio conference. “The GDP tells only part of the story as the informal sector is hit more than its proportion,” he added.