Pakistan’s economic growth has slowed down in the fiscal second quarter due to record high interest rates impacting businesses and reducing consumer demand. Gross domestic product (GDP) only expanded by 1% in the October-December period compared to the same time last year, falling short of the median estimate of 1.8% in a Bloomberg survey. The National Account Committee has also revised upward economic growth for the previous quarter to 2.5% from 2.13%.
Agriculture saw growth of 5.02% from a year ago, while the industry contracted by 0.84% and the services sector grew by just 0.01%. Pakistan managed to avoid a sovereign default last year, but the economy is still fragile. Prime Minister Shehbaz Sharif, who won controversial elections in February, is seeking a new loan from the International Monetary Fund (IMF) to support the economy and boost foreign exchange reserves.
The IMF has lowered its GDP forecast for the current fiscal year to 2% from 2.5% due to weak domestic demand. However, the State Bank of Pakistan believes that better farming and industrial output will help support the economy. Pakistan’s economy experienced a rare contraction of 0.17% in the previous fiscal year.
The nation heavily relies on IMF aid with $24 billion in external financing needs in the upcoming fiscal year, which is about three times its foreign exchange reserves.