The government has made some much needed structural reforms in the economy in a bid to unlock an IMF package. However, questions are being raised about the continuity of the policies after receiving the bailout, especially when elections are due this year and there will be a new government in the country after almost six months.

Pakistan lacks consistency in policies and political stability, which are the main reasons for its poor economy. The country faces challenging economic conditions, including the repercussions of the recent flooding and continued policy and political uncertainty. As the country implements policy measures to stabilise macroeconomic conditions, inflationary pressures dissipate, and rebuilding begins following the floods, and growth is expected to pick up to 3.2pc in FY2023-24 — still below previous projections, according to the Word Bank.

The World Bank also forecast Pakistan’s economic growth to slow further to two per cent during the current year — down by two percentage points from its June 2022 estimate — because of the devastating floods and slowdown in global growth rate. In the report, the Washington-based lending agency said Pakistan’s economic output was not only declining itself but also bringing down the regional growth rate. It forecast Pakistan’s GDP growth rate to improve to 3.2pc in 2024, but that too would be lower than the earlier estimate of 4.2pc. “Policy uncertainty further complicates the economic outlook of Pakistan, in addition to flood damages and the resultant increase in poverty,” the bank said, explaining that an already precarious economic situation in Pakistan, with low foreign exchange reserves and large fiscal and current account deficits, was exacerbated in August last year by severe flooding, which cost many lives.

“Recovery and reconstruction needs are expected to be 1.6 times the FY2022-23 national development budget,” it said, adding that the flooding is likely to seriously damage agricultural production — which accounts for 23pc of GDP and 37pc of employment — disrupting the current and upcoming planting seasons and pushing 5.8 million people into poverty.

The latest forecast also points to a “sharp, long-lasting slowdown” with global growth pegged at 1.7pc this year, compared to 3pc it predicted in June, said the bank’s latest Global Economic Prospects report. It said that global growth was slowing sharply in the face of elevated inflation, higher interest rates, reduced investment, and disruptions caused by Russia’s invasion of Ukraine.

Pakistan, with low foreign exchange reserves and rising sovereign risk, saw its currency depreciate by 14pc between June and December and its country risk premium rise by 15 percentage points over the same period. The South Asian region is anticipated to grow by 5.5pc and 5.8pc in 2023 and 2024, respectively — slightly 0.3pc to 0.7pc lower than earlier estimates — mainly because of supporting 6.6pc and 6.1pc GDP growth in India. “This pace reflects still robust growth in India, Maldives, and Nepal, offsetting the effects of the floods in Pakistan and the economic and political crises in Afghanistan and Sri Lanka. The deteriorating global environment, however, will weigh on investment in the region,” the report said.

In the region excluding India, growth in 2023 and 2024 — at 3.6pc and 4.6pc, respectively — is expected to underperform its average pre-pandemic rate. This is mainly due to weak growth in Pakistan, which is projected at 2pc in FY2022-23, half the pace that was anticipated in June last year. Food prices have risen rapidly in South Asia, especially in Pakistan and Sri Lanka, increasing the incidence of food insecurity in the region.

Export bans on food, also increasingly prevalent, could have unintended consequences and exacerbate increases in global food prices. Afghanistan, Bangladesh, India, and Pakistan implemented export restrictions on food in 2022, including rice, wheat and sugar. The recent floods in Pakistan are estimated to have caused damage equivalent to about 4.8pc of GDP. Extreme weather events can exacerbate food deprivation, cut the region off essential supplies, destroy infrastructure, and directly impede agricultural production. In some economies, the World Bank report noted, the deterioration in economic conditions has led to a substantial rise in poverty (Afghanistan, Pakistan, Sri Lanka). Many households are consuming less nutritious food, and rolling electricity blackouts have become common as fuel has been rationed. The combination of limited foreign exchange buffers and widening external current account deficits encouraged several countries (including Bangladesh and Pakistan) to approach the International Monetary Fund to help bolster foreign exchange reserves and mitigate external financing pressures. In parallel, governments have tightened fiscal policies and, in some cases, imposed import controls and food export bans.

According to Moody’s Analytics, a bailout from the IMF alone is unlikely to put the economy back on track. “Our view is that an IMF bailout alone isn’t going to be enough to get the economy back on track. What the economy really needs is persistent and sound economic management,” senior Economist Katrina Ell said. “There’s still an inevitably tough journey ahead. We’re expecting fiscal and monetary austerity to continue well into 2024. Even though the economy is in a deep recession, inflation is incredibly high as a result of the latest bailout conditions,” she said.

The two reports point out that Pakistan will have to end political instability for consistency in its policies. For this purpose, state institutions should be given autonomy so that they could continue policies and adjustments even after a change of government in the country.