The Asian Development Bank (ADB) said on Wednesday that while Pakistan’s economic growth reached around six per cent in FY22, it was expected to slow down in the current fiscal year to 3.5pc because of double-digit inflation, climate headwinds and policy efforts.

In the latest Asian Development Outlook update, the ADB revised Pakistan’s growth estimates from 4.5 to 3.5pc amid devastating floods, policy tightening, and critical efforts to tackle sizeable fiscal and external imbalances.

It stated that growth in FY22 was driven by higher private consumption and an expansion in agriculture, services and industry, particularly large-scale manufacturing.

ADB Country Director for Pakistan Yong Ye said the recent floods that caused widespread damage had added “profound risk to the country’s economic outlook”.

“We hope that flood-related reconstruction and economic reforms will catalyse significant international financial support, stimulate growth, and preserve social and development spending to protect the vulnerable. ADB is preparing a package of relief, rehabilitation, and reconstruction to support people, livelihoods, and infrastructure immediately and in the long-term,” he added.

In a news release, the lender said Pakistan’s economic outlook would be shaped largely by restoration of political stability and continued implementation of reforms in accordance with the International Monetary Fund (IMF) programme.

“Private consumption expanded by 10pc in FY2022 resulting in improved employment conditions and higher household incomes. Agriculture output increased by 4.4pc in FY2022 supported by strong performances in crops and livestock.

“Agriculture growth is expected to moderate due to flood damage and high input costs next year, which may diminish services growth, particularly wholesale and retail trade,” the release said.

The ADB update stated that fiscal adjustments and monetary tightening were expected to lead to a contraction in domestic demand in FY23, which along with capacity and input constraints due to the rupee’s depreciation, would reduce industry output.

Inflationary pressures would remain high in FY23 with the forecast rising to 18pc, it said.

“In addition to the floods, the elevated inflation rate along with possible fiscal slippages as general elections approach, and a higher-than-projected increase in global food and energy prices, remain downside risks to the outlook,” it concluded.