Macroeconomic Brief No. 1

Buffeted by back-to-back external shocks and internal challenges during the past couple of years, Pakistan’s economy has begun to show some signs of improvement: inflationary pressures have eased; the current account balance has improved significantly; and the fiscal deficit has narrowed down to 5.2 percent of GDP, a decline of about thirty percent in 2008-09. Despite these signs of recovery, however, growth prospects for 2009-10 remain grim as the economy continues to face serious challenges on both external and domestic fronts. There is, therefore, a need to gear macroeconomic policies towards consolidating the nascent recovery while at the same time laying the foundations of sustainable growth.