Pakistan’s economic growth to improve, which might widen current account deficit: IMF

The International Monetary Fund (IMF) has projected that Pakistan’s economic growth will improve in the current fiscal year, which is expected to widen the current account deficit to around 0.9% of GDP, as estimated by the country's central bank.

IMF's World Economic Report, released on Friday, indicated that by the end of the fiscal year, inflation in Pakistan is expected to drop to around 9.5%, down from an average of 23.4% in the previous fiscal year.

The IMF highlighted that the global fight against inflation has had a positive impact on developing economies, with commodity prices dropping, benefiting countries with larger import bases.

Economic growth in Pakistan is expected to reach 3.2% in FY25. In FY24, the GDP grew by 2.4%, rebounding from a negative growth rate of 0.2% due to flood impacts.

The increase in economic growth may lead to higher imports, potentially widening the current account deficit to about 0.9% of GDP in the current fiscal year.

Last year, the deficit was 0.2% of GDP, or $1.7 billion, compared to $3.2 billion the year before, according to the State Bank of Pakistan data.

The IMF also anticipates a decrease in the unemployment rate to 7.5% from 8% a year ago.

Pakistan's Finance Minister, Muhammad Aurangzeb, is currently in Washington attending the annual meetings of the World Bank and IMF.

According to reports, finance minister has secured assurances for new loans, including $1 billion from the IMF, $500 million from the Asian Development Bank, $3 billion from the Islamic Trade Financial Corporation, and $120 million from the International Finance Corporation.

State Bank of Pakistan (SBP) Governor Jameel Ahmed met with international financial members, highlighting Pakistan's significantly improved economic indicators and a promising outlook.

He credited the SBP's prudent monetary policy and the government's fiscal consolidation efforts for restoring macroeconomic stability. The governor also recognized the challenges faced by global and emerging economies like Pakistan and stressed the need for tough yet essential policy measures to address these challenges.