The World Bank’s Board of Executive Directors on Wednesday approved $350 million in financing for Pakistan to support fiscal and competitiveness reforms.
The financing comes for the Second Resilient Institutions for Sustainable Economy (RISE-II) Operation, which aims to strengthen fiscal management and promote competitiveness for sustained and inclusive economic growth, read a World Bank statement.
“Pakistan needs urgent fiscal and structural reforms to restore macroeconomic balance and lay the foundations for sustainable growth,” said Najy Benhassine, World Bank Country Director for Pakistan.
“RISE-II completes a first phase of tax, energy and business climate reforms geared to raising additional revenues, improve the targeting of expenditures and stimulate competition and investment.”
World Bank projects 1.7pc growth rate
World Bank said that the RISE-II Operation contributes to better fiscal management by improving fiscal policy coordination, enhancing debt transparency and management, strengthening the taxation of property, and improving the financial viability of the power sector.
The operation also aims to foster growth and competitiveness by reducing the cost of tax compliance, improving financial sector transparency, encouraging the use of digital payments, and promoting exports by lowering import tariffs.
“Based on the foundations laid through RISE II and parallel support by other IFIs, Pakistan has the opportunity to tackle long-standing structural distortions in its economy after the upcoming general elections. Failing to use this opportunity would risk plunging the country back into stop-and-go economic cycles,” says Derek H. C. Chen, Task Team Leader of the operation.
Days ago, the World Bank in its report, ‘Leveraging Diaspora Finances for Private Capital Mobilization’, projected a drop in remittance flows to Pakistan to $24 billion in 2023 and further drop below $22 billion with 10% decline in 2024.
The report said growing economic turmoil sparked by a balance of payment crisis and high debt have led to a worsening loss of public confidence reflected in a diversion of remittances from formal to informal channels.
Last month, 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.
“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 back then.
“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 World Bank in its report, ‘South Asia Development Update Toward faster, cleaner growth’, published in October, projected positive growth for Pakistan in fiscal year 2023-24, but at only 1.7%, while saying that the economy remains dependent on capital inflows to finance substantial fiscal and current account deficits.