World Bank Report Highlights Pakistan’s Economic Prospects and Challenges

The World Bank has released a new report on Pakistan’s economy, predicting a rebound in the coming fiscal year. However, the report also highlights significant challenges that the country will face.

According to the report, real Gross Domestic Product (GDP) growth is expected to reach 1.7% in FY24 and 2.4% in FY25. These projections are based on the assumption that the government will implement its International Monetary Fund (IMF) program, secure new external financing, and continue to tighten fiscal policy.

Despite these positive projections, the report warns that growth is likely to remain below potential over the medium term. The economy will also remain vulnerable to domestic and external shocks.

The report identifies several key challenges that Pakistan will face:

  1. High inflation: Inflation in Pakistan is at record highs and is expected to remain elevated in the near term.
  2. Widening current account deficit: The current account deficit is expected to widen due to limited easing of import restrictions and higher domestic energy prices.
  3. Weaker currency: The Pakistani rupee has depreciated significantly in recent months and is expected to remain under pressure.
  4. High public debt: Public debt is high, and interest payments are consuming a growing share of government spending.
  5. Political uncertainty: Political uncertainty poses a major risk to the economy.

To address these challenges, the report recommends several reforms:

  1. Comprehensive fiscal reforms: This includes reducing tax exemptions, broadening the tax base, and improving the management of public debt.
  2. Improved public expenditure: This includes reducing distortive subsidies, improving the financial viability of the energy sector, and increasing private participation in state-owned enterprises.
  3. Strengthened debt management: This includes improving institutions and systems and developing a domestic debt market.

The report also emphasizes the need to boost private sector investment and seize opportunities created by the global energy transition.

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