Pakistan’s Economic Growth Slows Down Amid Global Downturn and Political Instability

Record Interest Rates Slowing Economic Growth in Pakistan

Pakistan’s economic growth slowed down in the fiscal second quarter, with record high interest rates negatively impacting businesses and consumers. The gross domestic product (GDP) only expanded by 1% in the October-December period compared to the same time last year, falling short of the median estimate of 1.8% in a Bloomberg survey. The National Account Committee also revised upward economic growth for the previous quarter to 2.5% from 2.13%.

Despite managing to avoid a sovereign default last year, Pakistan’s economy remains fragile. Prime Minister Shehbaz Sharif, who won controversial elections in February, is seeking a new loan from the International Monetary Fund (IMF) to support the economy and boost foreign exchange reserves. However, the IMF has lowered its GDP forecast for the current fiscal year to 2% from 2.5%, citing weak domestic demand as a major factor.

The agriculture sector saw growth of 5.02% from a year ago, while the industry contracted by 0.84% and the services sector grew by just 0.01%. Despite these challenges, Pakistan’s economy experienced a rare contraction of only 0.17% in the previous fiscal year, which was lower than expected due to global economic downturn and political instability at home.

Pakistan heavily relies on IMF aid with $24 billion in external financing needs in the upcoming fiscal year, which is about three times its foreign exchange reserves. The State Bank of Pakistan believes that better farming and industrial output will help support the economy and improve financial stability in the country moving forward

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