KARACHI: The State Bank of Pakistan’s (SBP) annual report issued on Friday included some concerning reports of the World Bank and analysed the situation that is alarming and threatening for the country’s economy.

“Even if Pakistan grows at an average growth of 8.3 per cent, it will not be able to reach the income level of OECD (Organisation for Economic Cooperation and Development) countries before the year 2050,” the SBP report said, quoting a World Bank report on development.

However, with such growth Pakistan would be able to absorb the labour force and get closer to developed economies. The Vision 2025 already targets GDP to grow above 8pc from 2018 and onwards; this performance will elevate the country from lower-middle-income to upper-middle income level, it said.

“Certainly, this will be a challenging task, as a review of historical trends clearly shows very few occasions when the GDP growth had exceeded the 8pc level,” said the report.

The SBP report said that more than 40pc of the workforce in Pakistan is still engaged in low-productive agriculture sector (and also vulnerable to potential climate changes), which contributes only one-fifth of GDP.

“On the other hand, industry (where labour productivity is highest) absorbs 23pc of the labour, and it has performed poorly in recent years,” said the report. Low and falling share of industry in GDP and its concentration in a few sub-sectors (like textile and sugar) is a major concern, the SBP said, and suggested: “We need policies to absorb skilled labour in most productive sectors of the economy.”

The central bank noted that Pakistan’s rank in Global Competitiveness Index has slipped from 83rd (out of 131) in 2006-07 to 129th (out of 144) now. “In this situation, the burden to steer productivity growth and create sufficient jobs for growing workforce falls on the service sector.”

However, even the growth of the service sector is far lower than peer countries in the region, said the report.

We need to transform the economy by improving productivity across all sectors. Investment is an essential pillar of growth; Pakistan will have to substantially raise its investment rate from the current 15.1pc of GDP (public and private sectors).

Pakistan is one of the most water-stressed countries in the world. According to World Bank estimates, per capita availability of water in Pakistan is well below Afghanistan, India, Bangladesh and Somalia. This stress is likely to worsen further in view of growing population and stagnant supply.

Moreover, despite being categorised as one of the most water-stressed countries in the world, Pakistan still allows large losses and inefficient use of water, the report said. “This is alarming as water scarcity is likely to only worsen going forward due to growing population and urbanisation.”

In this situation, conservation of water through containing losses and improving productivity becomes the only viable option, it added.

Addressing the water scarcity, an equally important issue, is far more complicated as it requires close coordination between federal and provincial governments, it said, adding: “What we need is more storage to capture seasonal surpluses, and an appropriate pricing to incentivise water conservation.”

Published in Dawn, December 13th, 2015