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

People in Pakistan are seeking charity food handouts, according to a report released in the capital of the Philippines, Manila. The report, known as the Asian Development Outlook, paints a bleak picture for Pakistan’s next fiscal year, projecting a 15% inflation rate – the highest among 46 countries – and a 2.8% growth rate, which is the fifth lowest forecast for FY 2024-25. The Asian Development Bank has stated that Pakistan’s inflation rate is expected to reach 25% in the current fiscal year, making it the most expensive nation in Asia. The State Bank of Pakistan and the federal government had set an inflation target of 21% for this fiscal year, but it is likely to be missed despite implementing a 22% interest rate.

The ADB also forecasts a 1.9% economic growth rate for Pakistan in the current fiscal year, positioning it as the fourth lowest after Myanmar, Azerbaijan, and Nauru. The country is experiencing stagflation, and there are concerns that an additional 10 million people may fall into poverty due to adverse economic shocks. The ADB’s report highlights substantial external financing requirements and the rollover of old debt as challenges for Pakistan’s economy. Political uncertainty and its impact on macroeconomic policy making are identified as key risks to the sustainability of stabilization and reform efforts.

The report emphasizes the need for further IMF support to improve market sentiment and attract affordable external financing from other sources. Furthermore, the Finance Minister of Pakistan is set to meet with the IMF Managing Director to request a new bailout package. The IMF MD has indicated that there are significant issues to be addressed in Pakistan, including expanding the tax base, improving public spending allocation, and creating a transparent economic environment. The ADB anticipates a reduction in domestic demand in Pakistan due to low confidence, rising living costs, and the implementation of tighter macroeconomic policies under the IMF programme.

The government’s goal is to achieve a primary surplus of 0.4% and an overall deficit of 7.5% of GDP in FY2024, gradually declining in subsequent years, although the World Bank has expressed doubts regarding Pakistan meeting these budget targets.