Domestic and global demand have affected industry and service sector activity. With the destruction of infrastructure and disrupted access to schools, medical facilities, and sanitation systems, the floods have negatively impacted health and education outcomes especially for rural areas, potentially affecting long-term human capital accumulation.
Economic growth is expected to slow and remain below potential in the medium-term. Real GDP growth is expected to slow sharply to 0.4 percent in FY23, reflecting corrective tighter fiscal policy, flood impacts, high inflation, high energy prices and import controls. Agricultural output is expected to contract for the first time in more than 20 years due to the floods. Industry output is also expected to shrink with supply chain disruptions, weakened confidence, higher borrowing costs and fuel prices, and heightened uncertainty. The lower activity is expected to spill over to the wholesale and transportation services sectors, weighing on services output growth. Predicated on completion of the IMF program and sound macroeconomic management, output growth is expected to gradually recover in FY24 and FY25 but remain below potential as low foreign reserves and import controls continue to curtail growth. In the absence of higher social spending, the lower middle-income poverty rate is expected to increase to 37.2 percent in FY23. Given poor households’ dependency on agriculture, and small-scale manufacturing and construction activity, they remain vulnerable to economic and climate shocks.
The Government faces a difficult policy challenge in maintaining progress towards macroeconomic stabilization. The economic outlook is dependent on timely and full implementation of policy reforms, with very high downside risks. Implementing the macro-stabilization measures and structural reforms underpinned by the IMF-EFF program is necessary for unlocking much-needed external refinancing and new disbursements from regional partners. Maintaining stability and a sustained recovery will require the development, communication, and effective implementation of a bold reform strategy, including: i) adherence to a flexible market-determined exchange rate and sound fiscal-monetary policies; ii) increased domestic revenue mobilization; iii) curtailing and improving the quality of public expenditures; iv) structural reforms to improve investment, competitiveness, and productivity; and v) urgent measures to restore the financial viability of the energy sector.
The basic unit of currency is the rupee, ISO code PKR and abbreviated Rs, which is divided into 100 Currently, the 5,000 rupee note is the largest denomination in circulation. From 13 August 2005, the SBP started introducing its fifth generation design of banknotes with additional security features, with the Rs. 20 note being the first issuance. New designs of Rs. 5 (July 2008, later replaced by a coin) 10 (May 2006), Rs. 20 (March 2008, new color scheme), Rs. 50 (July 2008), Rs. 100 (November 2006), Rs. 500 (January 2010), Rs. 1000 (February 2007) and Rs. 5000 (May 2006) were gradually introduced.[66][67][68]
GDP increased by about 1.5% annualized in the first half of 2023, it's expected to dip to -0.5% annualized in late 2023 or early 2024according to a preliminary estimate. Economic activity was heavily knocked by floods, government austerity and a balance-of-payments crisis. Turning to FY 2024, the economy appears to be turning over a new leaf
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