KARACHI: Pakistan’s overall economic outlook showed an “optimistic picture” of the country’s performance in the coming months, the finance ministry on Sunday, despite challenges posed by unprecedented floods.
The finance ministry said in its monthly report that key economic indicators like inflation, exchange rate and current account balance were showing encouraging trends.
“Overall economic outlook shows an optimistic picture of the economic performance in the coming months. The CPI inflation is declining, rupee has gained stability, current account balance is on improving trend,” it said in its report for the month of October.
“These developments indicate that economic activity will remain positive and persistent in coming months.”
The report highlighted the impacts of the floods that had caused more than $30 billion losses and affected 33 million people since the onset of monsoon season in mid-June.
Pakistan’s agriculture took the major hit, according to the World Bank and the finance ministry.
“In Pakistan, the economic environment is challenging due to damages caused by floods,” the report read.
“The agriculture sector has been particularly hard hit by the destruction brought on by the floods, and due to forward linkages, this impact will also be transferred to other sectors of the economy, thus changing the overall economic outlook.”
The World Bank’s recent assessment shows the flood damages to exceed $14.9 billion and the total economic losses to reach around $15.2 billion. It estimated the needs for rehabilitation and reconstruction in a resilient way at a minimum of $16.3 billion.
Housing, Agriculture and Livestock, and Transport and Communications sectors suffered the most significant damages at $5.6 billion, $3.7 billion and $3.3 billion, respectively, according to the World Bank assessment.
Sindh is the worst affected province with close to 70 percent of total damages and losses, followed by Balochistan, Khyber Pakhtunkhwa and Punjab.
The fiscal sector requires rehabilitation and massive expenditures that will pose a significant challenge for fiscal consolidation, according to the finance ministry.
“On the other hand, growth prospects have weakened, along with contained economic activities and low demand will impact on resource mobilization,” it said.
“Thus, FY2023 is moving with challenges, seeking balance policy mix for stabilization.”
Pakistan’s finance minister Ishaq Dar on Saturday painted a rosy picture of the economy, saying it was “on a firmer footing.”
The finance ministry said that inflationary risks had partially been alleviated due to timely decisions, including the import of perishable items by waiving off customs duties.
Administrative measures were also being taken to control price speculation to ease out inflation, it added.
But the weekly inflation, measured by the Sensitive Price Indicator (SPI), rose by 4.13 percent due to an 89.34 percent increase in electricity charges. The year-on-year inflation surged to 3.68 percent, according to data released by the Pakistan Bureau of Statistics (PBS) on Friday.
Citing slowed economic outlook of Pakistan’s trade partners, the finance ministry also warned of a “downside risk for exports in coming months.”