Reducing Pakistan’s economic growth rate prediction for the present fiscal year by nearly one percent, the World Bank (WB) stated that the last-ditch energy grants by the leaving government have put an extra load on the budget, thus threatening the International Monetary Fund (IMF) programme.
“The financing of the price cuts or subsidies can create an additional burden on the fiscal budget, threaten the ongoing programme with the IMF, and limit the use of the fiscal budget on other, more productive projects”, indicated the World Bank ahead of the IMF-WB Annual Spring Meetings starting from early next week.
During the launch of its latest ‘South Asia Economic Focus Reshaping Norms: A New Way Forward’, World bank’s Chief Economist for South Asia Region Hans Timmer revealed that these sponsorships were ‘unsustainable and ineffective’, adding right charges should be imposed to consumers and redistributed to poor households.
Read more: GDP growth to exceed 5 percent mark in fiscal year 2021-22
Moreover, the bank mentioned that Pakistan had already followed its contract with the IMF to confiscate tax exemptions and upsurge the tax on fuels. But, increasing energy prices locally and challenges from political opposition enforced the government to propose electricity and fuel price relief in February.
“While these measures can help reduce fluctuations in domestic prices, also constitute a direct burden or hidden liability on the government’s budget, which could increase fiscal vulnerabilities going forward”.
The World Bank stated that GDP growth is expected to slow to 4.3 percent in FY22 (against 5.6 percent last year) and to 4 percent in FY23.
Meanwhile, talking about the region, the bank stated development in South Asia, already fragile and uneven, will be slower as compared to previously projected, because of the effects of the war in Ukraine and persistent economic challenges. As a result, it forecast the region to grow by 6.6percent in 2022 and by 6.3percent in 2023. The prediction for the year 2022 has been revised downward by one percentage point as compared to the January projection.
