In its April 2024 report, the Asian Development Bank (ADB) expressed concerns over Pakistan’s economic future, citing political uncertainty and potential supply chain disruptions from the Middle East conflict as significant risks. The ADB emphasized the importance of continued support from multilateral and bilateral partners to address Pakistan’s large external financing needs and weak buffers.
The report underlined the importance of International Monetary Fund (IMF) assistance in implementing a medium-term reform agenda to boost market confidence and attract affordable external financing. It projected Pakistan’s economic growth for FY2025 at 2.8%, contingent upon progress in structural reforms, political stability, and improved external conditions.
While economic growth is expected to remain subdued in FY24, a rebound in private sector investment and structural reforms could drive growth in FY2025. However, inflation is forecasted to remain high at around 25%, primarily due to elevated energy prices.
On the supply side, post-flood recovery in agriculture is expected to drive growth, supported by government initiatives such as subsidised credit and farm inputs. Manufacturing is also expected to benefit from increased farm output and improved availability of critical imported inputs.
Despite the relaxation of import restrictions, the current account deficit is projected to widen to 1.5% of GDP in 2024, driven by increased imports and domestic demand. Pakistan faces challenges in meeting its external financing requirements, exacerbated by tight global financial conditions.
The report noted a 29.5% increase in tax collection, attributed to reforms in personal income tax and higher taxes on property transfers. Revenue mobilization is expected to strengthen further in the medium term through reforms aimed at broadening the tax base.
Overall, while Pakistan’s economic outlook remains uncertain, continued reforms and external support could help mitigate risks and pave the way for sustainable growth.
