The World Bank issued a grim forecast for Pakistan on Tuesday, warning that over 10 million additional individuals in the country face the risk of falling into poverty due to sluggish economic growth and soaring inflation. The bank’s biannual Pakistan Development Outlook report highlighted several concerning trends and projections:

1. Economic Growth: Pakistan’s economy is expected to grow by only 1.8% in the current fiscal year, falling significantly short of the official target of 3.5%. The next fiscal year’s growth rate is projected at 2.3%, below the population growth rate of 2.6%. The subdued recovery reflects tight monetary and fiscal policies, import management measures, and weak economic activity.
2. Poverty: Despite a broad-based economic recovery, poverty alleviation efforts remain insufficient. The poverty rate is projected to stagnate at around 40%, with approximately 98 million Pakistanis already living in poverty. Moreover, an additional 10 million individuals are at risk of slipping into poverty due to economic shocks.

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1. Inflation: Inflation is projected at 26% for the current fiscal year, driven by higher domestic energy prices. Despite easing global commodity prices and stability in the exchange rate, inflation pressures persist due to higher domestic energy prices and money supply growth.
2. Budget Deficit: The fiscal deficit is expected to increase to 8% of GDP in the current fiscal year, far exceeding the official target of 6.5%. The deficit will gradually decline over the medium term as interest payments decrease and fiscal consolidation measures take hold. However, there will be a primary deficit instead of a surplus as targeted by the IMF.
3. Circular Debt: The power sector’s circular debt continues to grow, reaching Rs2.635 trillion by January 2024. Delayed tariff adjustments, sector inefficiencies, and increased diversion of expensive RLNG to domestic consumers contribute to the accumulation of circular debt in both the power and gas sectors.

The report underscores the urgent need for structural reforms to improve Pakistan’s economic outlook, restore confidence, and address social discontent. Better fiscal management, lower inflation, and increased credit to the private sector are identified as critical factors for robust economic recovery and poverty reduction. However, without sustained reforms, Pakistan is expected to face challenges in managing its debt burden, external financing, and circular debt in the energy sector.