ISLAMABAD: Notwithstanding its fears over the economic fallout of Trump’s policies in the Asian region, the Asian Development Bank (ADB) on Wednesday improved Pakistan’s growth forecast to 3 per cent for the current fiscal year against its September estimate of 2.8pc following IMF support and the nascent economic recovery.

“Pakistan’s growth in FY25 is projected at 3pc, revised upwards from 2.8pc in September”, said the ADB’s in its Asian Development Outlook (ADO). In a special chapter of the ADO, the Manila-based lending agency warned that “policies under the incoming Trump administration in the US may impact the region. Changes to US trade, fiscal, and immigration policies could dent growth and boost inflation in developing Asia”.

The ADB said that greater macroeconomic stability following the approval of the new IMF programme under the Extended Fund Facility in September will support recovery. “Industrial output growth is projected to accelerate with the suspension of import management measures, higher investor confidence, and easier access to foreign exchange”, it said.

Approves $530m loan for power, social sectors

The ADO expected a more accommodative monetary policy because of faster-than-expected easing inflationary pressures to further support economic activity through rebounding private investment. “However, growth in agriculture is expected to weaken due to the heavy monsoon downpours during July–September 2024 and flood-like conditions in parts of the country”, it said and observed that wheat and cotton, two of Pakistan’s five major crops, were projected to perform poorly in FY25.

The ADB also lowered its inflation forecast to 10pc from 15pc due to faster-than-expected easing of inflationary pressures.

The report states that the overall impact of policy changes in the US would be slow in the short term, given that significant policy shifts could take time and be rolled out gradually. The short-term impact of the recent US election on China is expected to be muted. Chinese economic growth in 2025 could benefit from the frontloading of US imports, but there may also be lower investment in anticipation of the adverse effects of US tariffs.

The bank slightly lowered the growth outlook for developing Asia to 4.9pc for 2024 and 4.8pc for 2025. The growth forecasts for South Asia have been revised downward to 5.9pc for 2024 and 6.3pc for 2025, mainly due to India’s lower-than-expected second-quarter growth, driven by dampened manufacturing sector performance and lagging government spending.

$530m loans approved

Meanwhile, the ADB has approved $530 million in two additional loans to Pakistan to support its social protection programme and the ailing power sector.

On Wednesday, the ADB said it approved $330m in additional financing to strengthen Pakistan’s federally administered social protection programmes and services. It approved another $200m to modernise power distribution infrastructure and improve the ability of the three distribution companies — Multan, Sukkur and Lahore — to deliver reliable electricity.

The $330m result-based loan for the ongoing Integrated Social Protection Development Programme (ISPDP) will help expand grassroots-level social protection to alleviate poverty among poor women and their families.

The programme will enhance the institutional capacity of the Benazir Income Support Programme (BISP), Pakistan’s flagship social protection agency, to transition to adaptive and climate-resilient social protection. This will include enhancing access to education pathways for children and youth and increasing access to health services and nutrition supplies for beneficiaries who are in disaster-prone areas.

The $200m loan for the Power Distribution Strengthening Project aims to upgrade and modernise distribution systems to meet the country’s rapidly growing electricity demand.

The project will focus on reducing significant energy losses during transit and enhancing the resilience of infrastructure against climate change and disaster-related risks. In its initial phase, the project will support three major distribution companies: Lahore Electric Supply Company (LESCO), Multan Electric Power Company (MEPCO), and Sukkur Electric Power Company (SEPCO), paving the way for more efficient and sustainable energy delivery across these regions.

Published in Dawn, December 12th, 2024