State of the Pakistan Economy Growth, Inflation, Welfare and the Budget : Financial Year 2024

The Lahore School of Economics macro model estimates that Pakistan's GDP growth for FY 2023-2024 is projected at 1.68%, reflecting ongoing weaknesses in sectoral performance, particularly in large-scale manufacturing, which barely broke even after a contraction of -2.9% in FY 2022-2023. In contrast, GDP growth is expected to rise to 3.3%
for FY 2024-2025. This low growth trajectory has been corroborated by various institutions, with the GOP estimating 2.4% and the IMF at 2.0%. The report explores the structural hypothesis that Pakistan's GDP growth is constrained by external imbalances, leading to periodic crises and necessitating IMF bailouts. Inflation for FY 2023-2024 is
estimated at 18.9%, down from a peak of 33% in FY 2022-2023, primarily driven by a significant depreciation of the exchange rate and a fiscal deficit of 7.4%. The budget for FY 2024-2025 is highly aspirational, increasing from PKR 14.5 trillion to PKR 18.9 trillion, with tax revenues projected to rise from PKR 9.4 trillion to PKR 12.9 trillion. However, reliance on borrowing remains high, comprising over half of the total budget, raising concerns about sustainability. The report emphasizes the necessity for reducing borrowing costs and generating growth while addressing rising poverty levels, which have escalated from 5% in FY 2019-20 to an estimated 18% in FY 2022-23 due to inflationary pressures.