ASSESSMENTS

Pakistan's Prime Minister Will Struggle With an Economic Slowdown of His Own Making

Jul 1, 2019 | 12:03 GMT

Activists from the Pakistan People's Party hold bread aloft in a protest against Prime Minister Imran Khan's government budget on June 23, 2019, in the southern city of Karachi.

Activists from the Pakistan People's Party hold bread aloft in a protest against Prime Minister Imran Khan's government budget on June 23, 2019, in the southern city of Karachi. 

(RIZWAN TABASSUM/AFP/Getty Images)

Highlights

  • Reducing Pakistan's trade and fiscal deficits will be the main domestic challenge Prime Minister Imran Khan faces in the months ahead.
  • Austerity measures will dampen demand in Pakistan's consumption-driven economy, slowing growth.
  • The slowdown will offer the country's two main opposition parties an opportunity to challenge Khan and deflect attention from the corruption scandals that beset them.

Pakistan's $300 billion economy is approaching the doldrums after a period of strong growth. For the 2018-19 fiscal year that ended in June, economic expansion is forecast to have cooled to 3.3 percent, down from 5.5 percent year on year. For Prime Minister Imran Khan, managing the economy has provedĀ a major challenge since his Pakistan Tehreek-e-Insaaf took the helm in a coalition government in August 2018. To rein in the country's unsustainable trade and fiscal deficits, the government has hiked interest rates, allowing the Pakistani rupee to weaken, and cut public spending -- measures that initiated a slowdown by dampening growth in the consumption-driven economy. The slowdown will make for volatile politics in Pakistan in the short term as the opposition tries to exploit the economic pain....

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