Due to the country’s widening fiscal deficit between July and October, which increased by more than 115% Pakistan’s Ministry of Finance has predicted that inflation will remain high at 21 to 23%.
According to The Dawn
Pakistan’s fiscal deficit grew by over 115% between July and October of the current fiscal year 2022–2023 causing the MoF to predict high inflation of 21–23%.
The floods’ devastation means FY23 economic growth will likely fall short of the budgeted target. The Dawn reports that policymakers are challenged by low growth, high inflation, and low official foreign exchange reserves.
In a report, the Economic Adviser’s Wing (EAW) of Pakistan’s Ministry of Finance (MoF) stated that the government’s fiscal deficit from July to October 2022 was 1.5% of GDP (Rs1.266 trillion), up from 0.9% of GDP (Rs587 billion) in 2021.
Fiscal health declined as a result of increased expenditure growth driven by higher mark-up payments.
The challenge of helping those who live in flood-affected areas is one that the Pakistani government must overcome in the midst of this.
“According to the EAW report, the average Consumer Price Index (CPI) for the first five months (July-November) of FY23 was 25.1 percent, up from 9.3 percent during the same time last year. “It is expected that CPI inflation will remain in the range of 21-23 percent,” the Dawn report stated.
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In contrast to a deficit of $7.2 billion the previous year, the current account posted a deficit of $3.1 billion for July through November of FY23, according to the Dawn report.
Between October and November, the current account deficit decreased from $569 million to $276 million.
Ishaq Dar the Pakistan’s Finance Ministry,assured investors on Friday that “there is no way Pakistan is going to default,” despite acknowledging that the country’s economy had issues.
“It is a precarious situation for us. In 2016, our (previous) government left behind USD 24 billion in foreign exchange reserves. However, I’m not to blame.
The Dawn cited the State Bank of Pakistan as saying that the FY23 fiscal year saw a decline in growth as a result of the incumbent Pakistani government’s failure to prioritize it.
The bank noted that Pakistan’s Finance Ministry has failed to achieve price stability and financial stability despite giving up growth.
Pakistan’s central bank stated in its annual report that countries that put growth ahead of price and financial stability are unable to maintain their economies. It cited examples from other countries that “continue to grow while experiencing frequent boom-bust cycles and financial crises.”
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