Pakistan Economy: Lowest GDP growth in history in the current fiscal year

In its latest report, The State Bank of Pakistan (SBP)announced that Pakistan’s GDP growth for the current fiscal year will be below 6%. This is the lowest growth rate in the country’s history in the last five years. In its third quarter report, the SBP said that in the current fiscal year, actual growth of the GDP will remain between 5.5% and 6%.

Earlier, SBP also forecasted that inflation in the current fiscal year would remain between 8% and 9% but its latest forecast placed average inflation rate between 11% and 12%.

Daily Times reports:

The report said that the country’s economy is witnessing broad deterioration in key macroeconomic indicators due to a combination of adverse domestic and international developments. A disappointing wheat harvest would likely hold back the key agriculture sector, while chronic energy shortages — both households and businesses face regular power cuts — have hampered industries including steel and textiles, Reuters quoted it as saying.g. However, it added, it was important to note that the economy had fundamentally gained resilience as a result of structural reforms and liberalisation measures over the last 15 years.

The latest report also warned the government about the potential danger of its heavy borrowing that has already started to affect the country’s economy. By May 10 2008, the total borrowings of the government stood at Rs. 551billion. This has doubled Pakistangovernment’s total outstanding borrowings to Rs. 940.6 billion. Further continuation of this trend would accelerate the inflation. 

Pakistan just saw the establishment of the country’s first democratic government this year but it has a tough road ahead. The government should urgently address the issue of fiscal deficit; or else, the country will fall into severe economic crisis.