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ISLAMABAD: The World Bank on Saturday warned that the Panama Papers issue has “enhanced political risks in Pakistan” and created “some policy uncertainty”.
In its report titled ‘Pakistan Development Update’, launched on Saturday, the bank cautioned that the country was “exposed to natural disasters, political events and terrorism” on the domestic front, while the upcoming national elections may affect “reform momentum and macroeconomic policy orientation”.
Released twice a year, according to a World Bank statement, the report sets out “recent developments across the economy and identifies risks and opportunities in the near-term future before focusing on a handful of key development challenges”.
The bank is not the first international financial institution to warn that Panama Papers issue may have consequences for Pakistan’s growth.
Ex-govt adviser says investors have gone into ‘wait-and-see’ mode
Last year, International Monetary Fund President Christine Lagarde had noted that the perception of corruption in Pakistan would hurt private investment and impede efforts to promote sustainable and inclusive growth.
Increasing transparency, making people accountable and removing red tape could help address the issue of perception of corruption, she had advised.
A former economic adviser to the Ministry of Finance explained that the Panama Papers issue had raised political risks, since investors had already gone into ‘wait-and-see’ mode. This, he said, was due to the uncertainty surrounding the issue.
“When political risks increase, economic growth falls,” Dr Ashfaque Hassan Khan said, adding that the bank’s projections for the country’s economic growth over the next two fiscal years were not consistent.
Since the Supreme Court’s decision to form a joint investigation team to probe the assets of Prime Minister Nawaz Sharif and his family, experts are divided over whether this would yield concrete results or whether it was a mere “eyewash”.
Despite this, the bank notes that Pakistan’s economic growth is expected to climb to 5.2pc during the fiscal year ending in June, which is the highest in nine years.
However, there are significant downside risks to the projected outlook, and the country remains vulnerable to domestic and external shocks.
According to the report, the country’s growth rate will continue to accelerate, reaching 5.5pc in FY2017-18 and 5.8pc in 2018-19.
Slower progress in much-needed structural reforms would weaken growth prospects and discourage private investment, while a stable rupee-dollar exchange rate has resulted in the appreciation of the real effective exchange rate, which can erode Pakistan’s export competitiveness. Protracted global economic weakness, especially in the EU area, could negatively affect exports, it warned.
“Pakistan’s accelerating growth is good news and reflects the country’s success in building confidence. But the pace of reforms has slowed and it is important for the structural reforms to accelerate,” a statement quoted World Bank Country Director for Pakistan Illango Patchamuthu as saying.
Published in Dawn, May 21st, 2017
