It is now obvious that the IMF and the Government of Pakistan have a differing calculus to estimate the economy. The Fund has once revised down the economic growth projections at 3.6%, well below the official target of 4.2%. When presenting the Budget, Islamabad was euphoric and had zoomed out the growth forecast, hoping for a bumper crop and an upswing in industrial production.
But for the global lender, these statistics are more of utopian, and it firmly believes that poverty is exploding and hovers well over 45% of the population. It is also a documented fact that during the last three years, more than 10% of the populace has slid into have-nots, as the economy struggles to attract foreign investment in order to strike a balance between revenue generation and an insurmountable debt-servicing.
The worrisome aspect, however, is that the economy is once again in the monsoon-cyclone zone, and could get battered like in 2022 when it lost more than $10 billion to floods. The positive side, however, is that the macroeconomic focus has shifted from stabilisation to sustainability, and this is where official sources claim that per capita income has increased by 10% to $1,824.
Likewise, it is estimated that inflation will remain in the range of 3.5 to 4.5%, as the central bank has retained the policy rate at 11%, having halved it from 22% over the period of time. Moreover, the debt-to-GDP ratio has also declined to 69%, indicating improved fiscal management.
There are skeletons, nonetheless, in the cupboard too. The government is borrowing heavily from foreign banks, having obtained at least $7.3 billion from July 2024 to April 2025. This staggering figure exceeds the IMF bailout package, and does not bode well when exports are in a diminishing zone and the entire reliance is on remittances. To add to this is the concern voiced by diplomats in Islamabad over rising debt costs and dependence on commercial loans. There is no other choice but to go for stringent reforms in taxation and revive the power sector by cutting down on tariffs.
