Pakistan cuts growth forecast, foreign exchange reserves drop

Highlights:

• Industrial growth declines to -2.94%
• Economic growth nosedived from 6.1%
• IMF funding delay raises alarm for default

Pakistan has cut its GDP growth estimate for fiscal year 2022-23 to 0.29%, from an earlier estimate of 2%, the national accounts committee said, with a contraction in industrial growth underscoring concern of an acute economic crisis.

The country's growth was stunted by slowdowns in the agriculture, industrial and service sectors – with growth estimated at 1.55%, -2.94% and 0.86%, respectively, the committee said in a statement late on Wednesday.

Pakistan's fiscal year runs from July to 30 June.

GDP growth for FY2021-22 was revised to 6.1%, up from 5.97%, and the final figure for FY2020-21 was 5.77%, up from 5.74%, the committee said.

Battered by natural disaster, an acute balance of payments crisis, and the worst political turmoil in years, Pakistan has been trying to reach a deal with the International Monetary Fund (IMF) to disburse a stalled $1.1 billion of funding from a $6.5 billion bailout agreed in 2019.

A central bank statement said on Thursday Pakistan's foreign exchange reserves had dropped to $4.19 billion, barely enough to cover a month of controlled imports.

Hit last year by devastating floods and political chaos stoked by the removal of Imran Khan as prime minister, Pakistan's $350 billion economy has nosedived from over 6% growth in the last year.

The central bank said last week that GDP growth was likely to be significantly lower this year, compared with the previous year, even lower than its own revised estimate of 2%.

Pakistan posted its highest ever rate of inflation, of 36.4%, in April and its currency has depreciated to a historic low as part of IMF conditions to bring it in line with a market-based exchange rate.

The committee's latest GDP growth estimate for this financial year is lower than the World Bank's estimate of 0.4%, while the IMF said in April that the growth would be 0.5%.