Pakistan’s economy is entering a new fiscal year carrying the scars of the last one. The Economic Survey of Pakistan, released June 9 in Islamabad, paints a grim picture of fiscal year 2022-23. The numbers are not abstract. They translate into real hardship for millions.
Inflation averaged 29.2 percent over the first 11 months. That is the highest in decades. Food inflation hit 40 percent in May alone. For a household that spends most of its income on food, that is not a statistic. It is a crisis. The central bank raised its policy rate to 21 percent to try to cool demand. That makes borrowing expensive for businesses and families alike. Mortgage payments, car loans, and business expansion plans all get crushed under that rate.
The government’s debt servicing costs consumed 60 percent of tax revenues. That means for every rupee collected in taxes, 60 paise went straight to paying interest on past borrowing. That leaves little for schools, hospitals, roads, or disaster relief. And the disaster relief is desperately needed. The floods that submerged a third of the country in 2022 destroyed crops and livestock. Cotton production fell 34 percent. Rice output dropped 22 percent. Farmers who lost their harvests are now staring at a second year of losses. Agriculture, which was supposed to grow 4.5 percent last year, is now forecast to grow just 0.1 percent.
Industry is expected to shrink by 2.1 percent. Large-scale manufacturing is down 3.6 percent. Factories are producing less. That means fewer jobs, lower incomes, and less tax revenue for the government. The services sector, the largest part of the economy, is barely growing at 0.1 percent. The whole economy is running on fumes.
The GDP growth target for the year is 0.29 percent. That is down from 6 percent the previous year. It is a collapse, not a slowdown. The balance-of-payments crisis, the political instability, and the floods all hit at once. The current account deficit remains a pressure point. External debt and liabilities stood at $126.3 billion as of March 2023. That is a mountain of foreign currency obligations that must be serviced. The fiscal deficit is projected at 7 percent of GDP. The primary deficit, which excludes interest payments, is expected to be 0.4 percent. That means without the interest burden, the government is almost balancing its books. But with interest, the gap is wide.
What happens next? The government says it is taking measures to stabilize the economy. Finance Minister Ishaq Dar said the economy faces headwinds from both domestic and external factors. The central bank’s 21 percent policy rate is a blunt tool. It will curb inflation, but it will also choke growth. The IMF program, if it moves forward, will bring more conditions—more austerity, more tax hikes, more subsidy cuts. That will hurt, but the alternative is default.
For ordinary Pakistanis, the months ahead look tough. Food prices are high. Jobs are scarce. The cost of borrowing is prohibitive. The government has little room to spend on relief. The floods of 2022 are still a fresh wound. The economic survey makes clear that the country is in a fight for stability. The outcome is not yet certain.
