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Pakistan’s economic growth could be below 3% for next 2 years, World Bank says


Pakistan’s economic growth is expected to pick up from the current fiscal year but remain below 3% for the next two years, according to the latest estimates from the World Bank.

In a Pakistan development update issued the same day, the World Bank said “policy constraints to sustainable economic growth remain unaddressed.”

The economy is set to grow 1.8% in the current fiscal year ending June 30 and will expand to 2.3% in the following year and 2.7% in 2026 if there is continuous fiscal consolidation and a new bailout program from the International Monetary Fund, World Bank country economist Sayed Murtaza Muzafarri said in a briefing in Islamabad on Tuesday.

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The estimates come as Pakistan’s economic growth weakened in the second fiscal quarter after record high interest rates affected business activities. The South Asian country succeeded in averting a sovereign default last year, but the economy has remained fragile.

In a Pakistan development update issued the same day, the World Bank said “policy constraints to sustainable economic growth remain unaddressed.”

“Unless a major structural reform program is durably implemented, growth is expected to remain muted amid continued very low investment, persistent external imbalances, distortionary fiscal policies, and a large state presence in the economy,” the World Bank said.

Prime Minister Shehbaz Sharif, who returned to power after contentious elections in February, is seeking a new loan from the International Monetary Fund to support the economy and bolster Pakistan’s foreign exchange reserves.

The nation remains heavily reliant on IMF aid with $24 billion in external financing needs in the fiscal year starting July, about three times its foreign exchange reserves.

Inflation is expected to average 26% in the current fiscal year and will ease to 15% next year and 11.5% in 2026, World Bank’s Muzafarri said. In March, Pakistan’s inflation pace eased to 20.68%, the lowest in almost two years as borrowing costs reined in economic growth and domestic demand.

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