ISLAMABAD: After achieving GDP growth of 5.97% in the financial year 2021/2022, economic growth is expected to slow next year, according to the Pakistan Economic Survey released on Thursday.
The survey indicated that Pakistan’s economy faces several significant challenges. Inflation is too high, prospects for future growth in potential output are difficult.
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The budget deficit is at a level where its financing becomes difficult. In addition, a high trade deficit leads to external imbalances exerting additional pressure on foreign exchange reserves and the exchange rate. “Economic growth looks set to slow next year,” he added.
In addition, the strong uncertainties are restricting market confidence. In the short term, Pakistan faces the challenge of financing its external financing needs resulting from current account deficits and external debt service.
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The successful completion of the seventh review of Pakistan’s reform program, supported by an expanded IMF financing facility, is a step in the right direction.
The government is very determined to ensure stability and confidence in the economy.
A stable fiscal policy with a higher growth trajectory for the Public Sector Development Program (PSDP), based on the development of physical and human capital, will be mandatory.
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Similarly, subsidies aimed at stimulating the development of innovative industries and services will be essential. On the revenue side, growth-oriented revenue policies will help. There is an urgent need to create an enabling environment for investment.
Furthermore, the investment must be able to significantly increase the share of GFCF in GDP as well as increase efficiency to create additional welfare. Investors and consumers need to be convinced of a long-term sustainable and inclusive growth plan that inspires confidence in Pakistan’s economic future and inspires them to take action in their own interests and those of the country. Thus, well-functioning competitive markets are needed.
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It is also necessary to continue policies that have brought about improvements in related sectors. For example, the Prime Minister’s agricultural package and related agricultural policies have remained more effective for better agricultural performance. Similarly, policies related to the energy mix and energy efficiency.
In addition, a stable legislative and political culture is also necessary.
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As a result, potential output growth is expected to be improved, which will translate into higher employment and real income growth. It will also create additional capacity for exports and import substitution and a stable exchange rate environment.
Thus, fiscal and monetary demand management policies should on average be neutral and play their role of cyclical stabilizers when temporary shocks create deviations from the long-term growth path.