Annual Economic Review of 2021-22 Chapter 3: Annual Economic Review of 2021-22 The year, 2021-22, has just come to an end. It was a year characterized by considerable uncertainty both on the economic and political fronts. The new coalition government, which was inducted into power in early April 2022, took time initially to take the urgent policy actions. However, the petroleum prices have been raised by as much as 66 percent to 85 percent in relation to the level following the price reduction by the previous Prime Minister in end­February 2022. Big increases in the gas and electricity tariffs are pending. These steps were taken to facilitate the completion of the pending seventh review of the IMF program. The federal budget of 2022-23 had to be revised substantially to meet the IMF requirement of a primary surplus, with adequate resource mobilization and expenditure containment. The Extended Fund Facility has become operative once again. 3.1 The Global Economy The global economy had shown a strong recovery in 2021 after the containment of the pandemic, COVID-19. The year 2022 also started on a positive note. But the onset of the Russia-Ukraine war has led to supply shortages, escalation in commodity prices and a worsening of expectations in stock and foreign exchange markets. International agencies like the IMF have revised their economic projections for 2022 downwards as follows: • Global growth is projected to slow from 6.1 percent in 2021 to 3.6 percent in 2022. This is 0.8 percentage points lower than projected in January. • War induced price increases and broadening price pressures have led to 2022 inflation projection of 5.7 percent in advanced economies and 8.7 percent in developing economies, 1.8 and 2.8 percentage points higher than projected in January. The pressure on commodity prices is amply demonstrated by the escalation in the price of (Brent) crude oil, as shown in Figure 3.1 after February 2022. 39