Islamabad, Jan 11: Pakistan’s economy is on the path to gradual recovery after the significant downturn of 2022-23.
The IMF’s $7 billion Extended Fund Facility (EFF) is driving the projected 3.4% GDP growth for FY25.
The United Nations Department of Economic and Social Affairs (DESA) report, “World Economic Situation and Prospects 2025,” highlights this recovery.
The report credits IMF-backed fiscal adjustments for stabilizing economies across South Asia, including Pakistan, Sri Lanka, and Bangladesh.
The UN survey anticipates modest growth for Pakistan and Sri Lanka, with GDP increasing by 3.4% and 4.0%, respectively.
South Asia will maintain strong momentum, with a projected GDP growth of 5.7% in 2025 and 6.0% in 2026.
You Can Read: IMF Forecasts 3.2% GDP Growth for Pakistan in FY25
This expansion reflects strong performances in India, Bhutan, Nepal, and other neighboring countries.
However, the report underscores several risks that could derail these positive projections. Key challenges include geopolitical tensions, declining external demand, high debt burdens, and social unrest.
Climate vulnerabilities, such as heatwaves, droughts, and unpredictable rainfall, remain critical issues. In 2024, extreme weather events significantly impacted agriculture, reducing crop yields and disproportionately affecting rural households in Pakistan.
Inflation in South Asia is expected to ease, with rates forecast to decline from 9.9% in 2024 to 8.3% in 2025 and further to 7.2% in 2026. Pakistan’s central bank has already taken steps to support recovery by reducing policy rates, mirroring actions by Sri Lanka. These measures aim to provide relief to businesses and stimulate economic activity.
Debt servicing continues to strain countries like Pakistan, Sri Lanka, and the Maldives, where interest payments remain elevated due to post-pandemic economic pressures.
To achieve sustainable growth, the UN recommends implementing structural reforms and enhancing climate resilience.
Pakistan, in particular, must prioritize these reforms to address its fiscal and environmental challenges effectively.
Despite the obstacles, Pakistan’s gradual economic recovery reflects the resilience of its economy and the potential for long-term growth.
However, a cautious approach is necessary to ensure that recovery efforts address systemic vulnerabilities while fostering sustainable development across the region.
