IMF’s report shows deficits in the current account of 0.4% of GDP for the current financial year
Pakistan is facing over $ 8 billion in external debt drains in FY25 (excluding $ 13 billion in routinely rolling bilateral loans), and any delay in debt rolls can jeopardize the IMF program. Photo: File
Islamabad:
The International Monetary Fund (IMF) on Tuesday projected Pakistan’s financial growth rate of 3.6% for the current financial year when Finance Minister Muhammad Aurangzeb expressed hope that an agreement at the staff level with the lender for two tranches worth $ 1.2 billion reached this week.
The IMF released the World Economic Outlook Report from Washington and Pitty Pakistan’s economic growth rate of 3.6%. But it clarified that Pakistan’s financial “projections do not yet reflect the effect of flooding in the summer of 2025, whose influence is still assessed”.
The unfavorable consequences of the floods of economic growth, inflation, budget and external sector are one of the outstanding issues that inhibit the completion of the staff charges for the implementation of the second review of the Bailout package, according to the government sources.
Unlike the forecast of 3.6% economic growth, sources said the IMF staff during the last week’s indispensable discussions had projected 3% to 3.5% growth. They said the IMF’s view was that the recent floods have weighed the economic outlook, especially for the agricultural sector, considering the damage to major Kharif crops.
The government has already downward adjusted its 4.2% ambitious target to 3.5%, while the World Bank has made a forecast of 2.6% for the same reason.
The sources said that in the medium term, the IMF projected the IMF no more than 4.5% financial growth rate for Pakistan, which is also related to the support of any meaningful increase in exports and investments.
The global report was released the day Pakistan’s finance minister, also in Washington, “hoped” that the country would reach a staff agreement with the IMF within this week for two loan tranches totaling $ 1.2 billion.
In an interview with Reuters, Aurangzeb said “during this week we hope we can get the staff done at the level”. Previously, Aurangzeb met with Jihad Azour, director of the IMF’s Middle East and the Central Asia department and took the question of the signing of the staff level agreement.
A press release from the Ministry of Finance stated that both sides exchanged views on Pakistan’s reform agenda and confirmed their common obligation to maintain the current momentum of reforms. The meeting underwent progress during the second review of the extended fund facility (EFF) and recognized the importance of maintaining macroeconomic discipline, the ministry added.
The IMF team had returned to Washington last week without reaching a staff agreement on the end of the second review of the $ 7 billion package due to differences over four key issues. These outstanding issues are timing for the official publication of the report on management and corruption diagnosis assessment, the primary budgetary target and the fiscal effect of the flood losses.
The World Outlook report has projected an inflation rate of 6% for Pakistan, which in turn can undergo changes due to the effect of the floods. During the last week’s discussions, the IMF team stated that the heading inflation was expected to remain within the interval 5% to 7% before they temporarily rose over the target towards the end of the financial year due to negative foods and energy price based effects, the sources said.
The IMF report showed the loss of 0.4% of GDP for the current financial year, while the Ministry of Finance has projected the loss of 0.2% of GDP.
The Ministry of Finance also stated that Aurangzeb held a meeting with Robert Kaproth, the US Assistant Minister of International Finance and adviser Jonathan Greenstein. During the discussion, the minister highlighted the strong economic basic elements of Pakistan, supported by the ongoing IMF program, added it.
Aurangzeb assessed the US Ministry of Finance’s officials in Pakistan’s recent legislation to regulate virtual assets. He invited additional US companies to explore investment opportunities in Pakistan’s oil and gas, mineral, agricultural and information technology sectors according to the Ministry of Finance.
Global prospects
The IMF has revised the global economic prospects of the global economic outlook for the 2025 calendar year from 2.8% to 3.2% due to less than expected negative impact of the US customs wall on global trade. It also revised the US economic growth forecast to 2% and China’s at 4.8%.
The Outlook report stated that the year 2025 has been fluid and unstable, with much of the dynamics driven by a re -ordering of political priorities in the United States and adaptation of policies in the other economies to new realities.
It added that trade news has dominated the headlines and together with them has perceived the prospect of the global economy. A number of new customs measures from the United States raised tariffs to levels that were not seen in a century.
Nevertheless, tariffs are very far from falling back to their levels by 2024. Uncertainty of trade policy is still increased in the absence of clear, transparent and durable agreements among trading partners – and with attention begins to change from any customs level to their influence on prices, investment and consumption, according to the Outlook report.
Previously, fear of the Customs Grove in April and the associated uncertainty that it unfolded, the IMF to downhill revise the global growth projection for 2025, by half a percentage point to 2.8%.
But the IMF said that several protectionist trade measures have had a limited impact on economic activity and prices. Growth held up in the first half of the year, with a quarter year for the year quarter’s annual growth speeds sustained with approx. 3.5%.
The unexpected resistance of activity and muted inflation response reflects – in addition to the fact that the customs of the customs have proven to be less than originally advertised – a number of factors that provide temporary relief, rather than underlying strength in economic basic, it added.
Households and businesses fronted their consumption and investments in the expectation of higher tariffs. This gave a temporary boost to global activity in early 2025. Trade flows began to adapt, with diversion to third countries, caught in high -frequency data, according to the IMF.
