As per the projections of the Economist Intelligence Unit (EIU) Pakistan’s economy would be growing by a yearly average of 2.9 per cent in 2018/19-2022/23, in comparison to the previous growth of 5.4 per cent.
The recommendations issued by the EIU comes in mid of Pakistan’s under process negotiations with the International Monetary Fund (IMF) which started on the 7th of November and are anticipated to end by the 20th of November.
EIU mentioned the political considerations, particularly of the United States May make complications in the negotiations, however, it anticipated Pakistan to settle at seven billion dollars IMF bailout package by early 2019.
It also added that the government would probably be carrying out the structural reforms at the IMF’s request, but, their extent would be limited.
Accordingly, owing to an expected reduction on public spending, some projects under the CPEC would develop at a slower pace and would not be affecting the bilateral relations with China, as said by the EIU.
Additionally, EIU is of the belief that the present government of PTI would find it hard to put into effect its democratic agenda of developing the social welfare provision, which covers promises of low-cost housing and new jobs.
Also, it indicated the government’s decision to announce a significant reduction in planned development spending for the fiscal year 2019 and further decrease would probably be bringing the fiscal deficit down.
It also mentioned that besides the latest surges on the prices of gas and electricity tariffs, the IMF is likely to ask for more increases to curb the price distortions and to manage developing debts in the energy sector, which is ruled by the public enterprises.
As per EIU, the financial disciplines would be improving over the expected period of 2019-2023 however it might challenge the popularity of the government of PTI.
While conversing about the policy interest rate, EIU mentioned that it would be surging at 14 per cent by the end of 2019 under an IMF programme which would strike on the local demand and restrain import growth, resulting in causing a decline in imports.
According to EIU, the fiscal strictness and the tightening of the monetary policy would likely be reducing the overall GDP growth significantly.
EIU further said that the government might have to stop certain CPEC projects due to restricted financial space. Other than this, it is expected that China would remain affable with Pakistan in 2019-2023.