State Bank of Pakistan has provided a gloomy assessment of the national economy, stating that the growth rate for the current fiscal year will be “significantly lower than the previously revised projection of around 2%.”

Over the past two fiscal years, FY21 and FY22, Pakistan’s economy experienced a growth rate of 6% annually.

Despite forecasts from several research institutions predicting an economic contraction for the current fiscal year ending on June 30, 2023, the central bank maintains a more optimistic outlook in its latest growth projection. This contrasts sharply with the predictions made by those research institutions.

In its biannual report on Pakistan’s economic state for July to December 2022, released on Friday, the State Bank of Pakistan (SBP) indicated that the projected decline in economic activity is attributed to a slowdown in the agricultural and industrial sectors, which has negatively impacted the services sector.

The growth prospects for FY23 have been heavily affected by measures implemented to control demand in the economy as well as the devastating floods of 2022.

The SBP expects inflation to remain high, ranging between 27% to 29%, compared to approximately 12% in FY22. Additionally, while there has been a significant improvement in the current account, the balance of international payments remains vulnerable. Revenue collection is expected to remain low, contributing to a rise in the fiscal deficit.

The global market’s limited liquidity also poses risks for a further decline in workers’ remittances and export earnings, according to the SBP.

It is important to note that the analysis and projections in the biannual report were based on data from July to December FY23 and finalized in March 2023.

On the fiscal front, the central bank states that the Federal Board of Revenue’s tax collection has slowed down due to temporary import restrictions and subdued economic activity. Furthermore, increased interest payments on public debt have led to higher current expenditures, resulting in a reduction of fiscal space.

SBP projects inflation to remain elevated within the range of 27% to 29% in FY23.

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