Finance Minister Muhammad Aurangzeb has projected Pakistan’s economic growth between 3.5 and 4 percent for the current fiscal year despite the severe impact of recent monsoon floods that devastated farmland, displaced over four million people, and killed over 900 across the country.
In an interview with Bloomberg, the finance minister said the initial assessments showed damage to the country’s rice and cotton sectors, adding more detailed damage assessments will take place in the coming months.
“This will put in a dent to our GDP growth number,” he said. “My own view is it will still be north of 3.5%, early days, but anywhere between 3.5 to 4.”
Prior to the flooding, the Pakistani government projected economic growth of 4.2% for the fiscal year ending next June.
“Climate change for us is not academic,” he said. “We are living it, and the recent floods actually are a reflection of that.”
Pakistan’s economy has been stabilizing following a near-default on government debt two years ago. The country is set to receive about $1.2 billion in loans from the International Monetary Fund after signing off on a staff-level agreement with the IMF, following a successful review of its $7 billion loan program.
The third loan installment is expected to help bolster the country’s $407 billion economy, which has stabilized after it narrowly avoided a default on government debt two years ago.
The IMF estimates the country’s economy will grow between 3.25% and 3.5% in the fiscal year to June despite the destructive monsoon rains. Pakistan predicts inflation may cross the upper bound of its 5%-7% target range this year, cooling from a record 38% two years ago.
Meanwhile, Pakistan and the US have moved to rebuild military and economic ties after years of strain. Economic links have grown with a trade deal that levied a 19% tariff on Pakistani goods, lower than regional peers and well below the 50% tariff on rival India, the Bloomberg reported.
The finance minister also said Pakistan planned to issue its inaugural tranche of yuan-denominated debt – known as Panda bonds – by late November or early December. The $250 million issue is key to diversifying the country’s funding channels, he said.
“We have tapped the US dollar market, we have done Euros, we have done Islamic sukuk, but we had not accessed the second largest, the second deepest capital market in the world,” he said.