Pakistan growth to hit eight-year low as IMF bailout looms

Pakistan’s growth rate is set to hit an eight-year low, a government report predicted Friday, with all major indicators down as the country continues negotiating its 22nd bailout from the International Monetary Fund. A report by the National Accounts Committee, released late Thursday, forecast growth of a mere 3.3 per cent in the current fiscal year against a projected target of 6.2pc. “These are provisional data, not final, but Pakistan’s economy is witnessing a slowdown,” Muzammil Aslam, an independent economist, said.

The report came as an IMF mission to Pakistan was expected to conclude its visit Friday, where it has been holding negotiations over a long-delayed bailout to stave off a potential balance-of-payments crisis. A deal could be announced shortly, according to local media. “We expect an IMF package similar to the one Pakistan obtained in 2008,” Aslam, who heads Emerging Economic Research, said. Then, Pakistan got a $7.6 billion loan for five years to support its programme to stabilise and rebuild the economy.

Analysts have warned that any fresh IMF deal could come with restrictions that would hobble Prime Minister Imran Khan’s grand promises to build an Islamic welfare state. Discontent is already growing over the measures the government has taken to fend off the crisis, including devaluing the rupee by some 30pc since January 2018, sending inflation to five-year highs. “I had to halve my blood pressure medicine dose as we can’t afford to buy expensive medicines,” Shehla Samad, a 45-year housewife, said in Karachi recently.

The IMF has issued an even more grim forecast for Pakistan, predicting economic growth of 2.9pc -- a 10-year low -- for the current fiscal year. Government officials said last month they have reached an “agreement in principle” with the IMF. But Khan’s finance minister Asad Umar, who was leading negotiations, quit after a cabinet reshuffle last month. “We need to take some difficult decisions and we need to show some patience.... Don’t expect that there will be miracles and rivers of honey and milk,” Umar warned after his resignation.

The negotiations are now being led by Abdul Hafeez Sheikh, a former World Bank official who was Pakistan’s finance minister from 2010-2013. The US has warned that it will be watching closely to ensure Pakistan does not use IMF money to repay debts to China, which has poured billions into the country for infrastructure projects under its Belt and Road Initiative. Pakistan, which joined the IMF in 1950, has had 21 bailouts since then.

Its most recent loan was issued in 2013, worth $6.6 billion. The United Arab Emirates, Pakistan’s largest trading partner in the Middle East and a major investment source, recently offered $3 billion to support the battered economy. Islamabad also secured $6 billion in funding from Saudi Arabia and struck a 12-month deal for a cash lifeline during Khan’s visit to the kingdom in October.