Government’s claims regarding low prices were contested on Wednesday when the Asian Development Bank (ADB) forecasted that the country will continue having the highest inflation rate in the South Asian region at a whopping 7.5%. ADB further forecasted the economy’s growth rate to be 4% which ranks at the fifth position amongst the seven South Asian countries.
These projections were reported in the semiannual publication of ADB referred to as the Asian Development Outlook Update (ADOU). The publication ranked Pakistan’s economic health in comparison to other South Asian Nations. It must be noted that ADOU did not take into account Afghanistan’s economic conditions because of the current political instability in the country.
Based off of the report, Pakistan’s “economy is expected to continue recovering in fiscal year 2021-22, with real GDP projected to rise by 4%”. The growth rates have been ranked in the following order; Maldives at 15% with the highest in the region, followed by India at 7.5%, Bangladesh at 6.8% and Nepal to grow at the rate of 4.1% and Pakistan with the fifth lowest rate of 4% in the coming fiscal year 2022. Pakistan is standing at the fifth position with a projection of 4% growth rate, which is similar to the rate for the preceding year and remains lower than the official target set by the Federal government.
The continuous improvement in the rollout of COVID-19 vaccines, growth in the private investment sector due to increasing business activity, improved consumer confidence and a number of economic stimulus policies introduced in the budget for the fiscal year 2022 are the reasons behind ADB’S projections. The bank further explained that these projections are dependent upon the recommencement of structural reforms in the last quarter of the year under the International Monetary Fund (IMF) Extended Fund Facility’s program which is underway.
“The economic outlook is clouded, however, by high uncertainty because it is closely tied to the course of the pandemic in Pakistan and globally.” Acknowledging the government’s Agriculture Transformation Plan, ADB commented that it believes the agriculture sector will significantly improve if the government follows through with its ambitious plan.
Factors such as the budget announced for FY22 including fiscal incentives which would accelerate growth in the industry, a significant increase in the development spending, encouraging private consumption supported through substantial agricultural harvests, a rise in earnings as well as robust remittance inflow owing to the easing of the social restrictions and the resumption of economic activities will all contribute towards positive economic growth projections. Growth in industrial and agricultural sectors as well as the forecasted rise in domestic demand promoting the services sector are all expected to lead to improvement in the country’s growth outlook for FY22.
Talking about the inflation rates ADB stated, “Inflation is projected to slow to 7.5% in fiscal year 2021-22, unchanged from the forecast in 2021,” Nevertheless, it remains as the highest inflation rate amongst South Asian countries, followed by 6.2%, 5.8%, 5.2% and a rate of 4.8% in Bhutan, Bangladesh, Nepal and India.
The aforementioned stats are in stark contradiction to the governments claims of having the cheapest petroleum products and basic commodities in the region as stated by the Special Assistant to Prime Minister on National Food Security Jamshed Cheema on Wednesday.
Even more concerning is the fact that the prices will continue to increase in case the Pakistan-IMF deal falls apart.
ADB expressed concerns stating, “Risk of inflation higher than forecast derives from any unusual increase in oil prices or from potential currency depreciation in the wake of any early winding down of the ongoing IMF program,”. Furthermore, global hunger is projected to impact the developing countries in Asia including Pakistan, Indonesia, India and Bangladesh as it affects another 291 million population.
In a survey conducted by ADB in order to study the impact of COVID-19 on farmers, it interviewed 839 and 774 farmers in 2020 and 2021. The survey concluded that the pandemic had negatively impacted farm households with the greatest damage in Sindh. Proving that the pandemic has exacerbated the already dismal conditions in rural households in the country.
As much as one-third of households relying primarily on farmer wages in Punjab suffered the loss of income and off- farm earnings in 2020. The fall in income has continued through 2021 as well.
Negative effects of the pandemic have continued to plague Sindh with 37% of the rural households facing reduction in wages and off-farm income in 2020 while the figure stands at 26% in the current year.
On the contrary, food and goods consumption has recovered back to the pre-pandemic level after seeing a dip of 10% in 2020.
ADB said that the forecasts will reduce fiscal deficit to around 6.9% of the GDP in the coming year. The forecast is higher than the previously set target under a fiscal consolidation program by the IMF.
According to ADB, revenue projections are expected to increase keeping in mind the robust domestic economic activity and rising import levels.