Pakistan economy grows faster than expected buoyed by IMF loan, lower rates

Pakistan’s economy grew faster than expected last quarter as funds from the International Monetary Fund and lower interest rates buoyed activity.

Gross domestic product rose 3.07% in the three months to June from a year ago, the Pakistan Bureau of Statistics said Monday. That compares with a forecast of 2.7% in a Bloomberg survey of economists and a revised print of 2.36% in the January-March period. For the financial year that ended in June, growth was revised to 2.52% from a reading of 2.38% earlier.

Pakistan was locked in a cycle of overlapping political and economic crisis that drove the nation close to default last year, but funds from multilateral lenders and loans from friendly countries have helped in stabilizing the country.

Foreign exchange reserves have strengthened from previously critically low levels, import and currency restrictions that hurt industrial activity have eased. Inflation has also cooled, helping monetary authority to lower borrowing cost by 450 basis points since June this year.

Last week, the government secured a final approval from the IMF for a fresh $7 billion loan program, that will bring certainty over financing over the next few years. The nation faces about $26 billion in loan repayments in the fiscal year started July.

The agriculture sector expanded 6.76% during the quarter on the back of a bumper wheat crop, while services sector expanded 3.69%, the data showed.

Prime Minister Shehbaz Sharif’s government has pledged to achieve a sustained growth by undertaking structural reforms in the economy. His administration forecasts an expansion of 3.6% in the year through June 2025.