The United Nations’ World Economic Situation and Prospects report for 2024 offers a nuanced perspective on Pakistan’s economic future, anticipating a modest GDP growth of 2% in 2024, followed by a slightly improved 2.4% in 2025. While these projections suggest a positive trend, the report raises red flags due to underlying risks and structural vulnerabilities in the global economy.
Major South Asian economies, including India, Pakistan, and Bangladesh, find themselves classified as lower-middle-income countries in the report. Despite this regional economic classification, challenges persist, notably in food security. In 2023, both Bangladesh and Pakistan witnessed an increase in people facing acute food insecurity, in contrast to Sri Lanka, where the situation improved. Afghanistan remains the most adversely affected, with 46% of its population facing acute food insecurity.
Delving into Pakistan’s economic landscape, the report reveals alarming statistics. The inflation rate soared to 39.18% in 2023, leading the State Bank of Pakistan to maintain a record-high policy rate of 22% since June 2023. Additionally, Pakistan experienced a currency depreciation of over 20% in the same year.
The nation grapples with substantial sovereign debt and an unsustainable debt-servicing burden. External debt accounted for 36.5% of the country’s nominal GDP in 2023, a notable increase from the previous year. The government debt-to-GDP ratio reached 89% in 2022, highlighting the challenges of managing fiscal responsibilities.
Real effective exchange rates, a comprehensive measurement, declined from 88.0 in 2022 to 72% in 2023. This index, reflecting Pakistan’s economic challenges, is calculated as a weighted average of bilateral exchange rates adjusted by relative consumer prices.
In conclusion, the World Economic Situation and Prospects report for 2024 portrays a complex economic landscape for Pakistan, blending modest growth projections with a backdrop of challenges, including inflationary pressures, currency depreciation, and elevated levels of sovereign debt.
