Pakistan economy to shrink, deficit to widen in year to end of June, government says

ISLAMABAD (Reuters) - Pakistan’s economy will shrink the most in decades while its fiscal deficit will likely widen to 9.4% of gross domestic product by the end of the financial year on June 30, a government report showed on Thursday.

A shopkeeper waits for customers while selling spices and groceries items at the retail market, as the outbreak of the coronavirus disease (COVID-19) continues, in Karachi, Pakistan June 11, 2020. REUTERS/Akhtar Soomro/Files

Prime Minister Imran Khan’s government, which will present its second budget for 2020-21 on Friday, had missed almost all economic targets by a wide margin even before the global new coronavirus pandemic, according to the Economic Survey 2019-20 report.

Gross domestic product for the year ending this month will likely contract 0.4% instead of growing 3.3% as previously forecast, Abdul Hafeez Shaikh, the de facto finance minister, told a news conference in Islamabad.

That contraction would be the deepest in decades.

The IMF and World Bank have projected that the economy will shrink by up to 2.6%.

“The range of estimates we have given, this shows that we’re not in a position at present that we could say with confidence what would be its result,” Shaikh said.

He said the IMF and World Bank were making bleaker assumptions keeping in view the severity and duration of the coronavirus pandemic. “In my view, we will have a better estimation when this year ends on June 30.”

The budget deficit is expected to reach 9.4% of GDP, exceeding the 7.5% target, the government said in its report.

Pakistan had been implementing reforms as part of its three-year, $6 billion IMF stabilization plan when the global pandemic struck its flagging economy.

The country has collected revenue of 3.9 trillion Pakistani rupees ($24 billion), below its downwardly revised target of 4.8 trillion.

It has now reversed almost all of its lockdown measures, mainly due to fears of an economic meltdown. The WHO has recommended that it restore lockdown measures intermittently to curb the spread of the virus.

Pakistan has reported 119,201 cases of infection and 2,356 deaths, including 101 over the last 24 hours.

($1 = 163.3200 Pakistani rupees)

Writing by Asif Shahzad; Additional Reporting by Gibran Peshimam and Syed Raza Hassan in Karchi, Pakistan; Editing by Hugh Lawson