Pakistan’s Economy Falters in Second Quarter Due to High Interest Rates and Reduced Consumer Demand

Pakistan’s economic growth weakened in the second quarter of the current fiscal year due to high interest rates and reduced consumer demand, according to recent data from the Pakistan Bureau of Statistics. Gross domestic product expanded by just 1% in the October-December period compared to a year ago, which is lower than the median estimate of 1.8% in a Bloomberg survey. Additionally, the National Account Committee revised upward economic growth for the previous quarter to 2.5% from an initial estimate of 2.13%.

In terms of sectors, agriculture saw growth of 5.02% from a year ago, while industry contracted by 0.84%. The services sector grew by a minimal 0.01%. Despite efforts to avoid a sovereign default last year, Pakistan’s economy remains fragile and is heavily reliant on IMF aid. Prime Minister Shehbaz Sharif is seeking a new loan from the International Monetary Fund to support the economy and boost Pakistan’s foreign exchange reserves.

The IMF has lowered its GDP forecast for the current fiscal year to 2% from an initial forecast of 2.5%, citing weaker domestic demand as one reason for this revision. However, the State Bank of Pakistan is more optimistic about the economy and believes that better farming and industrial output will support it in achieving sustainable growth in the future fiscal years