UNITED NATIONS: The UN’s World Economic Situation and Prospects report for 2024 outlines a nuanced economic outlook for Pakistan, projecting a modest GDP growth of two per cent in 2024 and a slightly improved 2.4pc in 2025.
However, this trend is overshadowed by concerning indicators. Last year’s robust global economic recovery post-Covid, which contributed to GDP growth across the world, conceals latent risks and structural vulnerabilities in the world economy.
South Asia’s major economies, including India, Pakistan and Bangladesh, find themselves categorised as lower-middle-income countries, according to the report. Despite the regional economic classification, challenges persist, notably in food security.
In 2023, Bangladesh and Pakistan experienced an increase in people facing acute food insecurity, contrasting with Sri Lanka, where the situation improved. Afghanistan remains the most adversely affected, with 46pc of its population facing acute food insecurity.
Digging deeper into Pakistan’s economic landscape, the report reveals alarming statistics. The inflation rate skyrocketed to 39.18pc in 2023, prompting the State Bank of Pakistan to maintain a record-high policy rate of 22pc since June 2023.
Additionally, Pakistan witnessed a depreciation of its currency by over 20pc in 2023.
Furthermore, Pakistan grapples with substantial sovereign debt and an unsustainable debt-servicing burden. External debt accounted for 36.5pc of the country’s nominal GDP in 2023, a noticeable increase from the previous year. The government debt-to-GDP ratio reached 89pc in 2022, underscoring the challenges of managing fiscal responsibilities.
Real effective exchange rates, a broad measurement, declined from 88.0 in 2022 to 72pc in 2023. This index, calculated as a weighted average of bilateral exchange rates adjusted by relative consumer prices, reflects Pakistan’s economic challenges.
In conclusion, the World Economic Situation and Prospects report for 2024 paints a complex picture for Pakistan, juxtaposing modest economic growth projections with a tapestry of challenges, including inflationary pressures, currency depreciation, and high levels of sovereign debt.
Published in Dawn, January 6th, 2024
