The World Bank downgraded its economic growth projection for Pakistan by nearly one percentage point, blaming last-ditch energy subsidies provided by the country’s outgoing administration.
“GDP growth of Pakistan is predicted to drop to 4.3 percent in FY22 (from 5.6 percent last year) and to 4 percent in FY23,” according to the World Bank’s research.
According to the lender, which is based in Washington, Pakistan must immediately cease providing energy subsidies, which it describes as “unsustainable and ineffective.”
However, the World Bank noted in its report, ‘the latest South Asia Economic Focus Reshaping Norms: A New Way Forward’, that economic growth is projected to recover to 4.2 percent in FY24, supported by the implementation of structural reforms to support macroeconomic stability and the dissipation of global inflationary pressures.
According to the report, countries in South Asia are already coping with rising commodity prices, supply constraints, and vulnerabilities in their banking sectors, among other problems. It is expected that the war in Ukraine would exacerbate these problems, causing inflation to rise even higher, fiscal deficits to widen, and current account balances to worsen even worse.
