The International Monetary Fund (IMF) has projected that Pakistan would be unlikely to meet all of its economic targets for the current fiscal year as the country faces unprecedented health and economic fallout from the COVID-19 pandemic.
The IMF also expected that Pakistan's GDP could shrink by 1.5% in FY2020 (the first annual contraction since 1952), due to declining consumption, investment, remittances, international trade, and private capital flows. This compares to IMF's previous projection of a 2.5% growth. Meanwhile, The World Bank said Pakistan's GDP could contract by 1.3% in the outgoing fiscal year, before inching up by only 1% in the next fiscal year.
The lockdown and the subsequent economic recession could lead to the layoff of over 5 million more labourers. This will increase Pakistan's unemployment rate to an unprecedented level of 14% with as many as 20 million falling below the poverty line, raising the number of poor in the country to nearly 100 million.
The IMF said Pakistan's budget deficit would swell to 2.9% of GDP in FY2020, from its previous forecast of 0.8% of GDP. This deficit increase is attributed to lower tax revenue which is expected to decline by 1.8 percentage point from the pre-pandemic level as the country requires higher spending to combat the virus and provide safety nets for unemployed people and very low-income households.
Pakistan's tax collection is expected to fall amid the pandemic. According to the IMF, the country would miss its tax collection target of Rs5.55 trillion ($33.30 billion) by Rs1.647 trillion ($9.88 billion). Meanwhile, non-tax collection is also expected to be around Rs1.287 trillion ($7.72 billion), compared to the government's target of Rs1.6 trillion ($9.60 billion).
