Pakistan’s economy is expected to see a boost, with the International Monetary Fund (IMF) projecting a 3.2% GDP growth rate for the fiscal year 2025, as inflationary pressures decline. While this growth is likely to have a positive, albeit slight, impact on the unemployment rate, concerns remain about its adequacy.
Ironically, the IMF forecasts GDP growth to reach only 4.2% by the fiscal year 2029, indicating that the low growth trajectory may persist even after the current 37-month Extended Fund Facility (EFF) program concludes. With a population growth rate of 2.55%, the projected GDP growth will be insufficient to create enough jobs or significantly reduce poverty over the medium term.
The question arises: how will the IMF program prove beneficial under these circumstances? According to the World Economic Outlook (WEO) report released by the IMF during the annual meetings in Washington, D.C., Pakistan’s unemployment rate is expected to decrease to 8% in FY25, down from 8.5% in the previous fiscal year.
The current account deficit is anticipated to hover around 0.9% of GDP for FY2025, compared to a negative 0.2% of GDP in the last fiscal year that ended in June 2024. This follows a current account deficit of 1% of GDP in FY23. The IMF data suggests that import restrictions were implemented to reduce the current account deficit, but this also negatively affected real growth rates.
Despite these challenges, Pakistan’s economic managers will need to find a way to maintain a stable exchange rate while achieving higher and sustainable growth rates beyond 5% without incurring current account and fiscal deficits.
