Pakistan's economy sees 2.52% growth in FY2024: PBS

KARACHI: Pakistan’s economy grew by 2.52% in the fiscal year 2024, primarily owing to strong growth in the agriculture sector.

The agriculture sector of the country saw better crop yields contributing to the overall economic performance. In the final quarter –April to June 2024– the country’s Gross Domestic Product (GDP) increased by 3.07%, Arif Habib Limited (AHL) said citing the Pakistan Bureau of Statistics (PBS).

The first three quarters of fiscal year 2024 also experienced positive, yet varying growth rates: 2.69% in the first quarter, 1.97% in the second quarter, and 2.36% in the third quarter. As the country was grappling with economic challenges, the agriculture sector played a crucial role in achieving this year’s growth.

While the agriculture sector thrived, other sectors of Pakistan’s economy, such as industry and services, faced acute difficulties. High inflation, energy shortages, and external debt continued to weigh down industrial output and business activity. Despite these challenges, the overall 2.52% GDP growth in fiscal year 2024 represents a modest recovery compared to earlier projections, which had anticipated slower growth.

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IMF recently approved a 37-month Extended Fund Facility for Pakistan amounting to SDR 5.32bn (USD 7 billion), the second highest amount ever agreed upon under any IMF programme in terms of SDRs. Following this approval, an initial disbursement of SDR 760 million (USD 1.1bn) has been released.

The new IMF programme is underpinned by effective policies and reforms aimed at assisting the Pakistani authorities in enhancing macroeconomic stability, addressing significant structural challenges, and creating conditions conducive to stronger, more inclusive, and resilient growth.

Key priorities suggested by IMF:

Rebuilding policy credibility and achieving macroeconomic sustainability: This requires consistent implementation of sound fiscal, monetary, and exchange rate policies, according to AHL. Priorities include better public spending, fairer and more efficient taxation, especially from undertaxed sectors, and creating fiscal space for increased spending on health, education, and social protection programs.

Enhancing productivity and competitiveness: Reforms should focus on improving the private sector business environment by removing state-created distortions and ensuring a fair and competitive playing field. This includes streamlining subsidies, improving the foreign direct investment regime, deepening bank intermediation, and scaling up investment in human capital.

Restructuring state-owned enterprises (SOEs) and public service improvement: SOE reform and privatisation, coupled with governance and transparency measures, will help improve public service provision. Additional measures include reducing the cost structure of the energy sector and phasing out the government’s role in price setting.

Building climate resilience: Implementing the Climate-Public Investment Management Assessment (C-PIMA) Action Plan and supporting the National Adaptation Plan will strengthen the country’s resilience to climate change, with a focus on sustainable infrastructure and disaster risk reduction.