Pakistan: Broke Islamist country has the highest cost of living in Asia
Virendra Pandit
New Delhi: With a whopping 25 percent inflation rate—lower now, because it was nearly 40 percent last year!—a nearly bankrupt Pakistan has the highest living cost in Asia and its economy may grow at the fourth lowest pace of 1.9 percent in the South Asian region.
According to a new Asian Development Bank (ADB) report, released on Thursday in Manila, the ADB Outlook painted a gloomy picture for the next fiscal year as well, projecting a 15 percent inflation rate, again the highest among 46 countries, and a 2.8 percent growth rate, the fifth lowest for FY 2024-25.
Reeling under a huge foreign debt, Pakistan has to pay nearly USD 20 billion of loans by June 2024 and has no clue where it would get the resources from. It is barely surviving hand-to-mouth, depending on doles and debts, which are also diminishing by the day.
The lending agency stated Pakistan is the most expensive nation in Asia. Earlier, the cost of living in Pakistan used to be the highest only in South Asia.
The State Bank of Pakistan (SBP) and the federal government had set the inflation target at 21 percent for this fiscal year but they are going to miss it despite inflicting huge losses in the shape of a 22 percent interest rate, the media reported on Saturday.
The ADB said during the current fiscal year, the country’s economic growth rate might remain at 1.9 percent — the fourth lowest after Myanmar, Azerbaijan, and Nauru.
Pakistan is in a stagflation phase for a prolonged period and the World Bank too said last week that another 10 million more people might fall into the poverty trap because of any adverse shocks. About 98 million people, out of a population of 238 million, are already living a poor life in Pakistan.
The latest ADB report stated that Pakistan would continue to face challenges from substantial new external financing requirements and the rollover of old debt, exacerbated by tight global monetary conditions.
The Manila-based lender said political uncertainty that affected macroeconomic policymaking would remain a key risk to the sustainability of stabilization and reform efforts. It said with Pakistan’s large external financing requirements and weak external buffers, disbursement from multilateral and bilateral partners remained crucial.
Further, IMF support for a medium-term reform agenda would considerably improve market sentiment and catalyze affordable external financing from other sources, the report added.
Finance Minister Muhammad Aurangzeb is set to meet the IMF Managing Director Kristalina Georgieva next week in Washington to request a new bailout package. She said this week that Pakistan was in discussions for a potential follow-up program.
However, Georgieva said that there are very important issues to be solved in Pakistan: the tax base, how the richer part of the society contributed to the economy, the way public spending is being directed, and creating a more transparent environment.
The ADB said low confidence, a surge in living costs, and the implementation of tighter macroeconomic policies under the IMF program would restrain domestic demand in Pakistan.
It said the government’s goal was to achieve a primary surplus of 0.4 percent and an overall deficit of 7.5 percent of GDP in FY2024, with both declining gradually in subsequent years. However, the World Bank said last week that Pakistan would miss both these budget targets.
