Pakistan Path to Economic Growth, Investment, Stability, and Reforms Needed

Pakistan Path to Economic Growth, Investment, Stability, and Reforms Needed

| 27-Jan-2025

Pakistan needs to streamline its regulations and enhance economic predictability to boost investment and accelerate growth, according to a senior World Bank official, Martin Raiser, as reported by Bloomberg.

The South Asian nation could potentially see an annual growth rate soar to 8% if it increases its investment and optimizes its resources, including human capital. Raiser emphasized that a 12% investment-to-GDP ratio would not yield significant growth. "You can't expect substantial growth if you invest only 12% of your GDP," he stated.

Pakistan's investment-to-GDP ratio has recently fallen below 15%, the lowest in the region, as per the finance ministry's data. Economists predict that Pakistan’s economy will grow by just 3% this year.

Recently, the World Bank approved a decade-long framework partnership with Pakistan to assist in stabilizing the country's business environment. The economy has experienced volatile growth cycles due to unsustainable fiscal policies, leading to funding gaps in vital sectors like health and education. Notably, nearly half of the government’s revenue is allocated to debt repayment and defense.

With a population of 240 million, Pakistan ranks lower on the World Bank’s Human Capital Index compared to other countries in South Asia.

Prime Minister Shehbaz Sharif is targeting a 3.6% growth by June, after avoiding an economic default last year with international support. As part of Pakistan’s agreement with the International Monetary Fund, Sharif has committed to boosting government revenue and addressing financial inefficiencies through restructuring and privatizing state-owned enterprises.

Raiser also noted that increasing the tax-to-GDP ratio to 15% is achievable through reducing exemptions for special interests, tackling tax evasion, and digitizing the tax collection process

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