In its latest quarterly performance report to the Asian Development Bank (ADB), Pakistan’s Finance Ministry outlined five major economic challenges confronting the nation, including rising fuel prices, poverty, and inflation.
The report, part of the $1.5 billion Building Resilience with Active Country-cyclical Expenditures (BRACE) program, highlights the significant impact of the Russian-Ukraine war on Pakistan’s economy, primarily due to soaring fuel costs.
Economic Challenges:
The Finance Ministry identified high fuel prices as a critical issue, noting their extensive multiplier effects across various sectors such as electricity production, industrial demand, and transportation. The report also pointed to the substantial impact of edible oil prices on GDP and household consumption, particularly affecting poorer households due to Pakistan’s reliance on imported palm oil.
Impact of Global Events:
The ongoing Russian-Ukraine conflict has exacerbated poverty levels, with the national poverty rate projected to rise by 3.7-4.0 percent, potentially pushing an additional 8.4-9.1 million people into poverty. The 2022 floods further compounded these challenges, affecting 33 million people and damaging vast areas of cropland, leading to lower economic growth and increased food insecurity.
Fiscal Adjustments:
Despite these challenges, the Finance Ministry reported encouraging revenue performance, with Federal Board of Revenue (FBR) revenues growing by 30 percent in the first half of fiscal year 2024. However, the overall fiscal deficit widened by 2.3 percent of GDP, while the primary surplus improved by 1.7 percent. The government has taken measures to control non-mark-up spending, contributing to an improved primary surplus.
Social Support Programs:
In response to the economic and humanitarian crises, the Benazir Income Support Programme (BISP) disbursed Rs. 69,222 million to 2.769 million flood-affected families during FY 2022-2023. The Finance Ministry reallocated funds to meet the budget requirements for emergency flood relief, highlighting the government’s commitment to supporting vulnerable populations.
The Finance Ministry’s report underscores the complex economic landscape Pakistan faces, shaped by both global and domestic challenges.
