THE gloomy picture of Pakistan’s economic outlook sketched by the World Bank in its new report, The South Asia Economic Focus, highlights a number of downside risks that may keep the nation’s growth prospects significantly subdued during the present financial year. Its forecast that growth this year would slow down to 3.4pc trumps the economic expansion target of 4.8pc the PTI government has been struggling to chase with the help of its expansive fiscal and monetary stimulus ahead of the 2023 elections. The report has warned growth could dip further because of the delays in the resumption of the $6bn IMF loan programme suspended since March over differences on electricity pricing and tax reforms as it would enhance Pakistan’s external financing difficulties. Other speed bumps identified by the report in Pakistan’s way to a higher growth trajectory include exceedingly high domestic demand leading to unsustainable external pressures, (possible) emergence of more contagious Covid strains and potentially negative spillovers from the situation in Afghanistan. Besides, the report anticipates an early rollback of the pro-cyclical policies (to mitigate the emerging external pressure and manage fiscal challenge) in the wake of the potential revival of the IMF facility to also hit the growth rate.
Sadly, the projected growth rate for Pakistan is the second lowest in South Asia and less than half the growth estimates of 7.1pc for the entire region. Economic commentators believe the country will remain trapped in the low-growth mould if reforms to structurally transform the economy are not introduced. Any attempt to grow the economy beyond the 3pc-4pc range without boosting domestic productivity, increasing exports, incentivising foreign investors, restructuring the tax system and tackling energy-sector debt is bound to result in the boom-and-bust fits we have frequently experienced.
However, not many are hopeful of the government bringing about deep, sustainable changes in the economic structure for fear of stirring up a hornets’ nest in the run-up to the next elections. The focus is likely to remain more on exploitation of the emerging geopolitical situation to get concessional and commercial foreign financing for paying our import bills — in spite of the adverse impact slow growth is having on the majority of Pakistanis who are forced to live under or just above the ‘poverty line’. The report shows that 37 out every 100 people are poor. The last Labour Force Survey illustrates that the unemployment rate among men and women seeking paid work has jumped from 5.8pc to 6.9pc. It highlights that at least 3.23m men and women entered the job market in FY19 with only 2.3m getting employment despite the survey showing a significant increase in the number of self-employed and unpaid family workers. Pakistan must grow by 7pc-8pc a year for the next several years to provide jobs to new entrants and cut poverty. But that kind of growth is nowhere in sight.
Published in Dawn, October 9th, 2021