The International Institute of Finance (IIF) on Friday said that Pakistan’s GDP growth could rebound to 1.8 percent in the fiscal year 2020-21 as the private consumption picks up.
“We expect gradual improvement in economic activity in FY2020/21 following a small contraction in FY2019/20. Exchange rate flexibility is helping to facilitate faster external adjustment. Modest current account deficit and improvement in net capital inflows would lead to a further rise in official reserves,” the IIF’s country report on Pakistan noted.
“Fiscal and structural reforms are needed to place debt on a downward path, but these could face opposition from key players. The completion of the second EFF review has been delayed pending implementation of key reforms included in the program.”
The institute, however, warned that the large fiscal deficit, on the back of low tax revenue mobilization, and high public indebtedness remain major challenges. Resistance to tax reforms and cost-recovery in the energy sector from entrenched elites could undermine the fiscal consolidation strategy and put public debt sustainability at risk.