ADB: Strong reform implementation essential for Pakistan’s economic growth

Increased domestic consumption, higher agricultural income and increased workers’ remittances helped pace Pakistan’s economic growth in the just-ended fiscal year 2024 through to June 30, according to an Asian Development Bank report issued yesterday.

Asian Development Outlook (ADO) September 2024: The report forecasted gross domestic product to have rebounded modestly to 2.4 per cent in FY2024 with a likely increase to 2.8 per cent in FY2025 coupled with a drop in inflation. According to the report, more continued strong adherence of the country to its economic reform program is required to strengthen macroeconomic stability and sustain growth in the face of persistent risks.

The future of the economy hinges very much on sustained and regular implementation of policy reforms to stabilize the economy and rebuild fiscal and external buffers,” says Yong Ye, ADB Country Director for Pakistan. Drivers of medium-term growth, he said, include consolidation of public finances, expansion of social spending; reduction of risks to public finances stemming from state-owned enterprises; and improvement of the business environment.

For FY2025, the economic adjustment program would more likely encourage a more stable macroeconomic environment more supportive of activities in the economy. To accelerate a rebound, private investment needs better conditions under the macroeconomy, such as easier access to foreign exchange, which also aids the manufacturing and services sectors. Growth in the agricultural sector is expected to decelerate.

Headline inflation eased to 23.4 percent in FY 2024 from 29.2 percent in FY 2023. Inflation, though high in the first half of FY 2024, was witnessed to decline mainly because of food price inflation in the latter half of the period due to increased agricultural output. Assuming well-regulated monetary policy, exchange rate volatility, and a stable international food price outlook, ADB expects inflation to decline further to 15 percent in FY 2025.

Established in 1966, the goal is to create a prosperous, inclusive, resilient, and sustainable Asia and the Pacific, minus extreme poverty. ADB is owned by 68 members that are 49 from the region.