Pakistan’s Economy Struggles with Slow Growth and High Interest Rates Despite IMF Aid

Record Interest Rates Slowing Economic Growth in Pakistan

In recent times, Pakistan’s economic growth has been on a downward trend in the fiscal second quarter due to record high interest rates. This has impacted businesses and reduced consumer demand, resulting in a Gross Domestic Product (GDP) expansion of only 1% during the October-December period. The economy fell short of the median estimate of 1.8% as per a Bloomberg survey.

Pakistan’s agriculture sector saw growth of 5.02%, while the industry contracted by 0.84%. However, the services sector grew by just 0.01%. Despite avoiding a sovereign default last year, Pakistan’s economy remains fragile and requires support to strengthen its position. Prime Minister Shehbaz Sharif is currently seeking a new loan from the International Monetary Fund (IMF) to aid the economy and boost foreign exchange reserves.

The IMF has revised its GDP forecast for the current fiscal year down to 2% from an initial forecast of 2.5%, citing weak domestic demand as a major factor affecting economic growth in Pakistan. Despite this setback, Pakistan’s State Bank believes that better farming and industrial output will help support the economy in the long run. The country experienced rare contraction of 0.17% in previous fiscal year but still heavily relies on IMF aid with $24 billion in external financing needs for upcoming fiscal year, which is about three times its foreign exchange reserves.

In conclusion, despite facing challenges such as slow economic growth and high interest rates, Pakistan’s government remains committed to seeking financial assistance from international organizations like IMF to support its economy and improve its overall financial situation for better future prospects for Pakistani people.

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