Highest Cost of Living in Asia: 25% Inflation Rate in This Country

People in Pakistan are seeking charity food handouts as they grapple with high living costs. The Asian Development Outlook was released in Manila, Philippines, and reported that Pakistan is facing a grim economic outlook for the next fiscal year, with a projected 15% inflation rate – the highest among 46 countries – and a 2.8% growth rate, the fifth lowest for FY 2024-25. The report highlighted that Pakistan’s inflation rate is expected to reach 25% in the current fiscal year, making it the most expensive nation in Asia.

This represents a significant increase from the previous status where Pakistan had the highest cost of living in South Asia. Despite the State Bank of Pakistan and federal government setting an inflation target at 21% for the fiscal year, it is anticipated that this target will not be met, with the country being in a stagflation phase for a prolonged period. The report also pointed out that the economic growth rate in Pakistan may remain at 1.9%, the fourth lowest after Myanmar, Azerbaijan, and Nauru, leading to the potential for another 10 million people to fall into poverty.

The Manila-based lender emphasized the challenges Pakistan faces from substantial new external financing requirements and the rollover of old debt, along with political uncertainty affecting macroeconomic policy making. It suggested that further IMF support could significantly improve market sentiment and catalyze affordable external financing from other sources. Meanwhile, Pakistan’s Finance Minister is scheduled to meet with the IMF Managing Director to request a new bailout package, with potential discussions for a follow-up program.

The IMF Managing Director outlined important issues in Pakistan, including tax base, contributions from the richer part of society, public spending direction, and transparency in creating a more sustainable environment. The report also highlighted the implementation of tighter macroeconomic policies under the IMF program and the government’s goal to achieve a primary surplus of 0.4% and an overall deficit of 7.5% of GDP in FY2024. However, the World Bank warned that Pakistan might miss both of these budget targets.