Economic growth to contract by 0.3%

Fitch Solutions has projected Pakistan’s economic growth to contract by 0.3% in the current fiscal year 2023 after the government allowed the local currency to devalue by a net 14.2% against the US dollar in the past four working days. The rupee closed at Rs268/83 in the interbank market on Tuesday, in the backdrop of other actions by the government to revive the International Monetary Fund (IMF) loan programme. The US-based global research house anticipated that the current cycle of rupee devaluation has not yet ended. The rupee will continue to lose its value against the US dollar, considering high demand for the foreign currency to pay for imports and repay colossal foreign debt. Accordingly, the country’s economic challenges are going to multiply, going forward, it said. “It (rupee devaluation) could exacerbate imported inflationary pressure and may eventually result in steeper policy rate hikes from the SBP (State Bank of Pakistan),” Fitch Solutions said in a report titled ‘Quick View: Pakistan Rupee Could Weaken Further’. “These factors will only exacerbate Pakistan’s challenging economic outlook. We currently expect the economy to contract by 0.3% in FY 2022/23,” noted the report dated January 30, 2023. To recall, Pakistan’s central bank said on January 23, 2023, that it had revised down its projection for economic growth to less than 2% for the current fiscal year 2023, as compared to around 2% for the year earlier.