ISLAMABAD: The Ministry of Finance is anticipating uncertain economic conditions with rising challenges of food insecurity, external account problems, high inflation and flood-related impacts.

“Pakistan’s external environment faces rising challenges. Recent floods brought on by extremely strong monsoon rains have negatively impacted crops, altering the economic outlook mostly through agriculture performance,” said the Ministry of Finance’s economic update for the September outlook.

It said the budget FY23 was prepared to achieve the goals of stabilising economic growth, increasing revenues, rationalising expenditures through prudent expenditure management, enhancing exports, and protecting the vulnerable segments of society through relief measures and pro-poor initiatives.

However, the economy of Pakistan has been affected severely by widespread destruction brought by extreme flooding. Consequently, there will be a detrimental impact on the government’s fiscal situation from both the revenue and expenditure sides.

It said that even if international commodity prices recede in near future, domestic inflation may still suffer from delayed adjustments and second-round effects. Also, the depreciation of the rupee continues to exert upward pressure on domestic prices. At the same time, recent exceptional floods have “destroyed human, physical, and livestock capital and deprived many families of their assets and incomes”.

Besides the cost in terms of lost lives and capital, these events will certainly affect the creation of gross value added and hence economic growth. The economic growth was already under pressure due to unstable economic conditions in the rest of the world and due to the necessary fiscal consolidation, high rates of interest, and inflation. “The economic outlook for Pakistan in the current fiscal year has become uncertain and will likely remain below the target,” it said, adding that macroeconomic imbalances may ease with the expected slowdown in the economic growth.

Published in Dawn, October 1st, 2022

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