World Bank warns of sluggish growth, high inflation.

Projecting a continuous mix of sluggish growth rate and high inflationary trends with substantial downside risks, the World Bank on Tuesday advocated Pakistan for a sharp fiscal adjustment of about 4pc of GDP and decisive implementation of broad-based reforms pledged to the International Monetary Fund to get out of the fiscal and macroeconomic quagmire.

"Predicated on the robust implementation of the IMF Standby Arrangement new external financing and continued fiscal restraint, real GDP growth is projected to recover to 1.7pc in FY24 and 2.4pc in FY25", said the World Bank's latest "Pakistan Development Update: Restoring Fiscal Sust-ainability" released on Tuesday. It estimated the rate of inflation at 26.5pc for the current fiscal year and 17pc for FY25. The WB officials in Islamabad said the huge depreciation, high exchange rates and resultant heavy bank borrowing to finance record fiscal deficits and debt servicing fuelled the spiralling multidecade high inflation rates. As a result, more than 12.5 million people are estimated to have fallen below the international poverty line ($3.65 per day) from the vulnerable stage or 39.4pc of the population under the poverty line FY23 down from 34.2pc in FY22.

The growth forecast is slightly lower than 2pc the Washington-based agency had forecast in June and less than half the 3.5pc target set by the government. Last month, the Asian Development Bank projected Pakistan's GDP growth rate at 1.9pc and rate of inflation at 25pc for the current fiscal year. Advises Rs2.7tr fiscal adjustments, strict compliance with reforms suggested by IMF. The WB forecast

Pakistan's fiscal deficit at 7.7pc of GDP in FY24 and primary deficit at 0.4pc of GDP unlike IMF's 0.4pc of primary surplus for the current year, showing a wide gap of 0.8pc of GDP or about Rs850bn.When highlighted, Najy Benhassine, Country Director for the World Bank in Pakistan and his colleague Adnan Ghumman said the WB's estimate was based on the latest data until SeptemberOctober of the current fiscal year compared to IMF's projections before the beginning of the fiscal year in June. Mr Najy said even the government had set its target in June based on 9month data.

Without a sharp fiscal adjustment and decisive implementation of broad-based reforms, Pakistan's economy will remain vulnerable to domestic and external shocks", Mr Najy said warning that economic growth was therefore expected to remain below potential over the medium term with some...