ISLAMABAD: The World Bank Tuesday while pointing out six major challenges facing Pakistan’s economy has launched a series of policy notes that outline critical policy shifts required for a productive, sustainable, resilient, and healthy Pakistan.
Addressing an event jointly organised by the WB and Pakistan Institute of Development Economics here, the World Bank’s Regional Vice President for South Asia, Martin Raiser, said that Pakistan’s economy is facing difficult situations, floods, and climate change.
The policy notes—focusing on child stunting fiscal sustainability, private sector growth, energy, learning poverty, agriculture, and climate change—are the culmination of several months of outreach and engagements conducted across the country under the “Reforms for a Brighter Future – Time to Decide” banner.
He said that policy notes are intended to help inform the public policy dialogue in the context of the upcoming elections.
He said that it was a critical moment for Pakistan as you are facing one of the worst economic crises of the country’s history following the catastrophic floods that hit last year, which were a sad reminder of how exposed Pakistan is to climate change. In the background, a silent human capital crisis is weighing heavily on Pakistan’s development.
He said that the WB is convinced there is a feasible path to get out of this crisis. With elections coming at the federal and provincial levels, it is indeed time to decide on the country’s path forward. Many countries have used crises as an opportunity to embark on fundamental reforms.
He said that many officials of the WB team talked to over the past two months are tired of the stop-and-go cycles of half-hearted reforms that are just enough for the country to muddle through but that offer no long-term perspective of improvement. There seems to be a growing recognition that deep changes are needed.
The stakes are high. Indeed, it is striking to see how far Pakistan has fallen behind, stating that during his first development class at the LSE in 1988, Pakistan was still held up as an example for strong human development in the region, with the second-highest cumulative increase in per capita incomes since independence after Sri Lanka.
However, now Pakistan is second to the bottom in per capita incomes and has education and health outcomes comparable to much poorer countries in sub-Saharan Africa.
Agricultural productivity growth over the past two decades has been less than one per cent per year, at a time when India’s was close to four per cent, and China’s close to five per cent.
Pakistan’s water productivity is one-third that of India’s, six times lower than China’s and 12 times lower than that of the US. For a country with 40 per cent of the labour force still in agriculture, these are alarming statistics.
“Pakistan’s economy is stuck in a low-growth trap with poor human development outcomes and increasing poverty. Economic conditions leave Pakistan highly vulnerable to climate shocks, with insufficient public resources to finance development and climate adaptation,” said Martin Raiser. “It is now time for Pakistan to decide whether to maintain the patterns of the past or take difficult but crucial steps towards a brighter future,” Raiser stressed.
The policy notes argue that Pakistan needs to: (i) Address its acute human capital crisis, including the high prevalence of stunting and learning poverty by adopting a coordinated and coherent cross-sectoral approach to basic services involving both provincial and federal governments. (ii) Improve the quality of public spending and take serious measures to expand the revenue base, ensuring that the better off pay their share. (iii) Pursue business regulatory and trade reforms and reduce the presence of the state in the economy to increase productivity, competitiveness, and exports. (iv) Remove distortions that undermine the performance of the agricultural and energy sectors, including through subsidy reform and privatization of electricity distribution companies.
Talking about possible reforms for Pakistan’s bright future, the report said that, there is a lack of investment and exports due to inconsistency in policies, while Pakistan’s agricultural sector is unproductive and stagnant.
According to the World Bank, there are six major problems facing Pakistan, including a human capital crisis. It says that the underutilization of available human resources is affecting the country’s productivity and growth. Moreover, 40 per cent of children under five years of age suffer from stunting.
Pakistan has the highest number of out-of-school children in the world, at over 20 million, according to the World Bank report, adding that 79 per cent of children under 10 years of age are unable to read or understand text. The report further says Pakistan faces a very high fiscal deficit. The fiscal deficit reached its 22-year high of 7.9 per cent at the end of the fiscal year 2022, it adds.
Pakistan’s outstanding debt has been found at a record high of 78 per cent above the legal limit, as per the World Bank report. It also notes that there is a lack of investment and exports due to inconsistency in the country’s policies.
Copyright Business Recorder, 2023