ISLAMABAD: Pakistan, with a 25% inflation rate has the highest living cost in Asia, as per a recent report released by the Asian Development Bank (ADB). The report states that the country is struggling with economic challenges primarily due to high inflation rate and slow growth.
The country’s economy is expected to grow at a sluggish pace of 1.9 per cent, fourth lowest in the region. With inflation at 15% and growth rate 2.8%, the report projects a bleak FY26 for the country..
The State Bank of Pakistan and the federal government had set an inflation target of 21 per cent for the current fiscal year, but they are likely to miss it despite a high 22 per cent interest rate. The ADB report indicates that Pakistan’s economic growth rate for the current fiscal year may remain at 1.9 per cent, placing it among the bottom four countries along with Myanmar, Azerbaijan, and Nauru.
The report highlights that Pakistan is experiencing stagflation, with the World Bank warning of a potential increase of 10 million people falling into poverty due to adverse shocks. With 98 million people already living in poverty, the country faces significant economic challenges.
The ADB report also mentions the need for substantial external financing and the rollover of old debt, exacerbated by global monetary conditions. Political uncertainty is identified as a key risk to the sustainability of stabilization and reform efforts, with the report emphasizing the importance of multilateral and bilateral partners’ support.
Finance Minister Muhammad Aurangzeb is scheduled to meet with IMF Managing Director Kristalina Georgieva to discuss a new bailout package. The IMF has acknowledged ongoing discussions for a follow-up program but has highlighted important issues in Pakistan, including expanding the tax base, enhancing public spending transparency, and ensuring contribution from all segments of society.
The ADB predicts that low confidence, rising living costs, and stringent macroeconomic policies under the IMF program will limit domestic demand in Pakistan. The government aims to achieve a primary surplus of 0.4 per cent and an overall deficit of 7.5 per cent of GDP in FY2024, although the World Bank anticipates challenges in meeting these targets.
