THE downgrading of the IMF’s growth forecast for Pakistan by 40bps to 2.6pc is perturbing, especially considering the country’s elevated poverty levels. More than 42pc of the population currently lives below the poverty line, while the World Bank estimates that 1.9m more people will fall into this category this year. An update to the World Economic Outlook notes that Pakistan’s economic growth is not enough to bring down poverty, despite a stabilising economy and the easing of inflation. Economists believe that the economy must grow by 6-8pc a year to cut poverty and create jobs for 2-3m new workers. The new IMF growth projections for Pakistan are based on the multilateral financial institution’s concerns about the potential impact of the high reciprocal US tariffs on its economy. Revising growth projections for the global economy as well as individual countries days after US President Donald Trump slammed his reciprocal tariffs on all of America’s trading partners and higher tariffs on dozens of countries — including Pakistan — running a trade surplus with the US, it notes that the tariffs have triggered a new climate of uncertainty.

At the moment, the IMF says, the situation is complex and fluid. Countries like ours continue to wonder what sort of deal, if any, they can strike with the Trump administration to maintain their share in the world’s largest consumer market. It is unclear then how Pakistan plans to negotiate with, and what it can offer, the Trump administration to get a favourable deal. However, some reports suggest that the government may offer American companies greater access to unexplored deposits of rare earth elements and dismantle barriers to US imports. While it is important to save — in fact, expand — our share in the US market, our policymakers also need to revisit their economic strategy. The post-tariff situation poses many challenges as the world enters an uncertain era amid escalating global trade tensions, but it also offers opportunities. However, the latter can only be exploited if the focus shifts to quicker implementation of structural reforms to attract FDI to boost industrial and agricultural productivity for diversifying and increasing exports through technology transfers. Unfortunately, to avoid a backlash from the powerful business lobbies and others, the authorities continue to look for short-term economic fixes rather than taking the more difficult route of mustering the political will to execute much-needed structural reforms.

Published in Dawn, April 24th, 2025