ISLAMABAD (AP) — The International Monetary Fund has slashed the growth outlook for cash-strapped Pakistan, forecasting the South Asian country’s fragile economy will grow just 0.5% this year, down from 6% in 2022.
The latest data on Pakistan’s ailing economy was released by the IMF on Tuesday, when it unveiled its World Economic Outlook report in Washington.
The IMF also forecast 27% inflation in the impoverished Islamic nation for 2023.
The global lender warned that unemployment will continue to rise in Pakistan. The country is struggling to avoid a default as it recovers from destruction caused by last summer’s floods, which killed 1,739 people and caused $30 billion in damages.
The coalition government of Pakistan’s Prime Minister Shahbaz Sharif is in talks with the IMF to receive a key tranche of a $6 billion bailout package signed in 2019 by Sharif’s predecessor Imran Khan. Sharif’s government in recent weeks slashed subsidies and raised taxes to comply with the bailout terms and secure the release of the $1.2 billion portion of the deal that’s been stalled since December.
But those measures resulted in increases in the price of food, gas and power in Pakistan.
Sharif’s government has become unpopular because of higher food costs, although he blames Khan, who is now the country’s opposition leader, for mismanaging the economy when he was in power.
While struggling to avoid default, the government is also battling a surge in militant attacks across the country. On Wednesday, Pakistani troops raided a militant hideout in the district of Bajur, in Khyber Pakhtunkhwa province, bordering Afghanistan. The raid triggered a shootout in which three insurgents were killed, the military said in a statement.
The region is known as a former stronghold of the Pakistani Taliban, a militant group that is separate from but allied with the Afghan Taliban next door.
Khan was ousted last April in a no-confidence vote in parliament, and since then he has been leading rallies in a failed attempt to force Sharif to agree to an early election, which is scheduled for later this year.