The World Bank on Wednesday cut its full-year economic growth forecast for Pakistan by almost 1 percent, citing an increased strain on the budget from the last energy subsidy of the outgoing Imran Khan government, local media reported. Citing the World Bank, the paper said: “Funding price cuts and subsidies could put additional strains on budgets, jeopardize ongoing programs with the International Monetary Fund (IMF) and other countries. “This could limit the use of the budget for more productive projects in the United States.”
It is expected to slow to 4.3% in 2022 (5.6% last year) and 4% in 2023,” the bank said. The bank noted that Pakistan had previously abolished tax exemptions and increased taxes on fuel under an agreement with the IMF. But rising domestic energy prices and challenges from political opposition forced the government to ease power and fuel prices in February.
Ahead of the annual spring meetings of the IMF and the World Bank, which begin early next week. Hans Timmer, the bank’s South Asia chief economist, called these subsidies “unsustainable and ineffective” and said consumers should be charged a fair price and redistributed to poor households. claimed to be. “While these measures help contain domestic price volatility, they also place direct burdens and hidden liabilities on government budgets and may increase fiscal vulnerabilities going forward.
Noting that energy subsidies are one of Pakistan’s challenges in the current environment, the bank said the country’s inflation rate will reach double digits before he eases in 2023. Moreover, government debt accumulated during the COVID-19 pandemic in Pakistan could lead to fiscal consolidation measures as general government debt reached more than 70% of GDP.
- Pakistan’s growth is projected by the World Bank to reach 4.3 percent
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