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World Bank Regional Vice President for South Asia Martin Raiser on Tuesday released a series of policy notes outlining critical policy shifts required for a productive, sustainable, resilient, and healthy Pakistan.
The policy notes focus on child stunting, fiscal sustainability, private sector growth, energy, learning poverty, agriculture, and climate change, with an aim to help inform the public policy dialogue ahead of the upcoming elections. “Pakistan’s economy is stuck in a low-growth trap with poor human development outcomes and increasing poverty,” he said in a statement. “Economic conditions leave Pakistan highly vulnerable to climate shocks, with insufficient public resources to finance development and climate adaptation. 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,” he added.
According to the policy notes, Pakistan must 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. It must also improve the quality of public spending and take serious measures to expand the revenue base, ensuring that the wealthy pay their share. Additionally, the notes urge the country to pursue business regulatory and trade reforms and reduce the presence of the state in the economy to increase productivity, competitiveness, and exports. Finally, the World Bank has advised the country to remove distortions that undermine the performance of the agricultural and energy sectors, including through subsidy reform and privatization of electricity distribution companies.
“Almost 40 percent of children in Pakistan suffer from stunted growth; more than 78 percent of Pakistan’s children cannot read and understand a simple text by the age of 10. These are stark indicators of a silent human capital crisis that needs priority attention,” said Raiser. “With additional spending on water and sanitation of around 1% of GDP per year and better coordination at the local level, stunting could be halved over a decade with significant positive impacts on growth and incomes. This is just one example of the huge economic benefits a coherent and decisive reform strategy could have,” he added.
In a separate press conference, the World Bank official cautioned against “quick fixes” such as the Special Investment Facilitation Council (SIFC), stressing these cannot succeed without resolving “big picture issues” through reforms aimed at improving the business climate, taxation and human capital. While acknowledging that the objective for the SIFC’s creation might be positive, he maintained it could not solve Pakistan’s economic challenges without improving the business climate.
To a question, Raiser said international experience suggested domestic debt restructuring had mixed results unless accompanied by sharp and sustained structural reforms. He warned that restructuring could render banks insolvent, which ultimately affected growth. He also explained that the World Bank’s policy notes were devised following engagement with all major political parties, including the PTI, PMLN, PPP and MQMP.
He also warned that if the country did not enact reforms in a sustained manner, it could impact its ability to secure future loans. To another question, he blamed low taxation on agriculture and real estate for low agriculture productivity, noting this hampered investment in irrigation, quality seed and other inputs. He said the reforms suggested by the World Bank could produce 7-9 percent of GDP’s additional resources, which could be sufficient to address some of the major challenges and yield sustained economic growth of 5-6 percent over a decade.
Meanwhile, World Bank Country Director for Pakistan Najy Benhassine told the gathering he hoped his institution could disburse up to $2 billion to Islamabad in the ongoing fiscal year. However, he added, this depended on elections being held on time and a visible commitment to reforms from both the incumbent and incoming governments.
During his visit, Raiser would meet government officials at the federal and provincial levels, as well as representatives from the private sector and academia. He would also visit the Dasu and Tarbela hydropower projects, as well as project sites in Sindh and Punjab.