In the midst of economic challenges gripping Pakistan, the United Nations Economic and Social Survey of Asia and Pacific (UNESCAP) for 2024 offers projections that paint a nuanced picture of the nation’s economic trajectory. Despite the hurdles, the report anticipates a 2% growth in the Gross Domestic Product (GDP) alongside a concerning 26% inflation rate for the ongoing fiscal year. This article delves into the key insights provided by the UN report and the broader implications for Pakistan’s economy.
Current Economic Landscape
GDP Growth and Inflation
The UNESCAP report projects a modest 2% GDP growth for Pakistan amidst prevailing economic turmoil. This growth, however, is shadowed by the ominous forecast of a 26% inflation rate, posing significant challenges for the country’s economic stability.
Tax-to-GDP Ratio
A critical concern highlighted by the UN forum is the widening tax gap, which currently stands at approximately 3% of the GDP. The report warns of the potential for this gap to escalate to over 12%, significantly surpassing the existing Federal Bureau of Revenue’s (FBR) tax-to-GDP ratio. The current fiscal year’s tax collection target, set at Rs9415 billion, represents around 9% of the GDP, further emphasizing the need for robust fiscal policies to bridge this gap.
Challenges and Adverse Impacts
Political Unrest and Natural Disasters
The UNESCAP underscores the detrimental effects of political unrest and natural calamities, particularly floods, on Pakistan’s economy. These challenges have disrupted not only businesses but also agricultural production, exacerbating the economic strain faced by the nation.
External Assistance and Fiscal Adjustments
In response to the economic crisis, Pakistan, along with Sri Lanka, has sought external assistance from institutions like the International Monetary Fund (IMF). Islamabad’s deal with the IMF in 2023, along with support from bilateral partners such as China, Saudi Arabia, and the United Arab Emirates, aims to alleviate the financial strain and facilitate economic recovery. Sri Lanka, despite economic contractions in recent years, has demonstrated resilience through fiscal adjustments and participation in IMF programs.