Arooj Zulfiqar

Pakistan has to focus on key sectors such as agriculture, manufacturing, and services in order to ensure sustained economic recovery, Uzma Zia, Senior Research Economist at the Pakistan Institute of Development Economics (PIDE), told WealthPK. “The economic recovery would require consistent efforts and policies aimed at boosting various sectors. Investment in infrastructure, technology, and human capital development will be vital to achieving these goals,” she said. “Furthermore, successful implementation of structural reforms, including those aimed at improving the ease of doing business, could create a more conducive environment for both domestic and foreign investment. This, in turn, could stimulate economic growth and job creation.

"It's encouraging to see the Asian Development Bank (ADB) projecting 1.9% growth; however, there are still several issues Pakistan must address, including inflation and fiscal deficits. Addressing these issues effectively will be key to maintaining economic stability in the long term,” she added. The ADB has forecast a slight recovery in Pakistan's GDP growth to reach 1.9% during the current Fiscal Year 2024 from 0.3% in FY2023. The bank’s September 2023 report says Pakistan’s economy will continue to face high inflation rates, advising the country to stick to its economic adjustment program until April 2024 to restore macroeconomic stability and gradually recover growth.

However, significant downside risks to the outlook remain, including global price shocks and slower global growth. According to the ADB Country Director for Pakistan Yong Ye, Pakistan's economic future is closely linked to the consistent implementation of policy reforms that can stabilize the economy and rebuild fiscal and external buffers. To revive economic growth and safeguard social and development spending, it is crucial to maintain greater fiscal discipline, adopt a market-determined exchange rate, and accelerate reforms in the energy sector and state-owned enterprises, he suggested.

Pakistan’s economy faced a lot of challenges including severe floods, global price shocks, and political instability in FY2023, which resulted in a decline in growth and increase in inflation. According to the ADB report, successful implementation of the economic adjustment program and a peaceful general election in FY2024 are expected to improve confidence, while easing import controls will support investment. The agriculture sector is expected to recover with the help of favorable weather conditions and the government’s relief package that includes free seeds, subsidized credit, and fertilizers. This recovery in agriculture will also benefit the industry by increasing its access to critical imports.

Credit: INP-WealthPk