Economic Overview
For the latest updates on the key economic responses from governments to address the economic impact of the COVID-19 pandemic, please consult the IMF's policy tracking platform Policy Responses to COVID-19.
Pakistan has achieved steady growth since 2013 in the aftermath of a credit facility agreement with the IMF. Economic growth slowed in recent years due to measures taken by the authorities to address macroeconomic imbalances and turned negative in the aftermath of the COVID-19 pandemic. According to the IMF's estimates, growth resumed in 2021, reaching 3.9%, and should follow an upward trend over the forecast horizon, at 4% this year and 4.5% in 2023. Private consumption (around four-fifths of GDP) has benefited from the fiscal support plan for households and from foreign remittances. Furthermore, the industrial sector performed above expectation in the period Apr-June.
Concerning public finances, the planned rebalancing of the public deficit that followed the conclusion of the agreement with the IMF worth USD 6 billion over 39 months has been halted by the crisis due to falling revenues and rising public expenditure. The federal budget deficit increased by 29% y-o-y to PKR 1.8 trillion (3.3% of GDP) in the first half of FY2022 (July-December 2021), despite a double-digit increase in revenues and a slowdown in public spending. Current expenditure accounted for 92% of total expenditure, of which 40% was spent on interests on loans. Public debt declined to 83.4% of GDP in 2021, and is expected to follow a downward trend over the forecast horizon (80.9% in 2022 and 75.8% next year – IMF). Massive rupee depreciation, persistent increase in the rates of agriculture commodities, and high prices of petroleum products were the main causes of high inflation, at 8.9% in 2021. The government has set the average inflation target for the FY2021-22 within the range of 7-9%, with the IMF forecasting a rate of 8.5% in 2022 followed by 7.6% in 2023.
Pakistan's unemployment rate increased slightly to 5% in 2021, from 4.1% before the pandemic, due to the negative economic impact of the COVID-19 pandemic. The IMF estimates that the rate will decrease to 4.8% this year and 4.7% in 2023. The number of people no longer actively seeking work is increasing. The level of underemployment remains very high and much of the economy is informal. While the poverty rate has fallen by 40% over the last two decades, it is still high: using the lower-middle-income poverty rate of USD 3.2 per day, in fact, the World Bank calculated that Pakistan's poverty ratio stood at 39.3% in 2020-21.
| Main Indicators | 2019 | 2020 | 2021 (e) | 2022 (e) | 2023 (e) |
| GDP (billions USD) | 276.94 | 261.73e | 0.00 | 0.00 | 0.00 |
| GDP (Constant Prices, Annual % Change) | 2.1 | -0.5 | 3.9 | 4.0 | 4.5 |
| GDP per Capita (USD) | 1,353 | 1,255 | 0 | 0 | 0 |
| General Government Gross Debt (in % of GDP) | 85.3 | 87.6 | 83.4 | 80.9 | 75.8 |
| Inflation Rate (%) | 6.7 | 10.7 | 8.9 | 8.5 | 7.6 |
| Unemployment Rate (% of the Labour Force) | 4.1 | 4.5 | 5.0 | 4.8 | 4.7 |
| Current Account (billions USD) | -13.43 | -4.45 | 0.00 | 0.00 | 0.00 |
| Current Account (in % of GDP) | -4.9 | -1.7 | -0.6 | -3.1 | -3.0 |
Source: IMF – World Economic Outlook Database , October 2021
Note: (e) Estimated Data
Country Risk
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