ADB Reports Tight Monetary and Fiscal Policies Impacted Pakistan's GDP Growth in FY23

The Asian Development Bank (ADB) has highlighted that Pakistan's GDP growth for fiscal year 2023 was adversely affected by the implementation of tighter monetary and fiscal policies. These measures were taken to safeguard macroeconomic stability, combat pervasive inflation, and address the significant damage caused by flooding in the country.

In its recent report titled "Asian Development Outlook: Robust Growth with Moderating Inflation," the ADB stated that South Asia, as a whole, is on track to achieve the growth forecasts outlined in the April 2023 edition of the report.

However, downward revisions were made for Nepal and Pakistan for 2023 due to the implementation of tighter monetary and fiscal policies. On the other hand, Bangladesh experienced an upward revision due to better-than-expected net exports.

The report highlighted that GDP projections for Pakistan were adjusted downward for fiscal year 2023 but remained unchanged for fiscal year 2024. The ADO April 2023 projection for Pakistan's fiscal year 2024 assumes that the government will continue implementing recommended reforms under a new policy-support program approved on July 12th, with guidance from the International Monetary Fund (IMF).

Inflation projections for Bangladesh and Nepal in 2023 were revised, while the actual inflation in Pakistan during FY2023 exceeded expectations, leading to an unchanged subregional forecast. The report emphasized that persistent demand-side pressures in Pakistan played a significant role in the upward revision of the subregional inflation forecast for 2024.

 Pakistan's GDP growth in fiscal year 2023 was impacted by tighter monetary and fiscal policies aimed at maintaining macroeconomic stability and combating inflation, compounded by the devastating effects of flooding. The ADB's report suggests the need for continued reform efforts in Pakistan, while also noting revised inflation projections for Bangladesh and Nepal.