The International Monetary Fund is due to release a tranche of over $1bn to the country. Barbara Pianese reports.

Pakistan’s inflation increased to 31.5% year on year in February 2023, the Pakistan Bureau of Statistics reported. 

The central bank of Pakistan raised its key interest rate by 300 basis points to 20% on March 2, 2023, pushing borrowing costs to their highest level since 1996 and the highest of any country in Asia. 

The country has been hit hard by rising food and fuel prices and catastrophic floods. Last summer’s floods killed 1739 people, destroyed 2 million homes and caused $30bn in damage.

The government is trying to cut expenditure and increase revenue through taxes, while allowing the rupee to depreciate.

The International Monetary Fund is due to release a tranche of more than $1bn to the country.

Domestic credit to the private sector by banks as a percentage of gross domestic product (GDP) has decreased a lot since 2008 without any signs of recovery in the past few years. In 2020, it was 14.9% compared to 39% in Bangladesh and 54.7% in India. 

Pakistan and Bangladesh have diverged economically since 1971, when they separated into two distinct countries. 

The differences in the growth of GDP and population in the two countries can well explain the achievements in the level of per capita income. The annual growth rate of GDP in Bangladesh rose from 1% in the 1970s to 6.2% in the last decade. In Pakistan the rate increased from 4.7% in the 1970s to 6.3% in the 1980s, but has since fallen to 3.8% in the last decade.


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