Pakistan requires major policy shifts in key areas for development: World Bank
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"There is broad consensus that action is needed to change policies that have plagued development"
(Web Desk) – "Pakistan’s current economic model is not working. It has fallen behind its peers, significant progress with poverty reduction has now started to reverse, and the benefits of growth have accrued to a narrow elite," wrote World Bank Country Director for Pakistan, Najy Benhassine, in his article in the recent UNDP publication.
He added: "Pakistan is heavily exposed to climate change, with the potentially devastating impacts of climate shocks and natural disasters already apparent. There is broad consensus that action is needed to change policies that have plagued development, benefitted only a few, and led to very volatile and low growth.
"Most economic crises get wasted. But many countries, including Indonesia, Thailand, India, Vietnam and others, have emerged from crisis through deep and sustained changes in their policies, resulting in step changes in growth, and sustainable improvements in living standards. Pakistan could do the same, but this will require major policy shifts in key areas.
"First and foremost, Pakistan’s persistently low quality of basic services for human development must be addressed. Forty percent of children under five suffer from stunted growth - this rate exceeds 55 percent in the poorest districts and has declined very little over the years. A major coordinated effort is needed to address the core drivers of stunting: low access to water, waste and sanitation services, basic health and nutrition services during the first 1000 days of life, etc. 79 percent of ten-year-old children cannot read; access to quality education is low and Pakistan’s public spending in the sector is around half what it should be to close the gap. Nearly seven percent of children do not survive until their fifth birthday. Reforms are required to expand access to water and sanitation in the face of climate change, enhance the coverage, adequacy, and efficiency of the social protection system, and address policy and institutional constraints to effective service delivery.
"Second, fiscal management must be drastically improved. Debt servicing costs and domestic revenue mobilisation are at unsustainable levels, leaving inadequate resources to invest in human development and infrastructure, address economic challenges, and adapt to a changing climate. Reforms are required to consolidate and improve the quality of government spending, including by cutting regressive and distortionary subsidies, and reduce losses from inefficient state-owned enterprises, including in the energy sector. More revenue must be raised from the better-off, through increased progressive taxation of property and environmentally-damaging activities, as well as reducing tax exemptions.
"Thirdly, improved living standards will require stronger growth and a more dynamic and open economy. Protection of inward-oriented sectors, or distortions in taxation that favour non-tradables, all need to be reduced to encourage exports. The overall business environment needs to improve, especially for smaller firms; cutting red tape as well as opportunities for costly discretion in the government’s dealing with businesses is paramount. Durably addressing structural macroeconomic imbalances, particularly on the fiscal, will remain a prerequisite to ensure a more stable economic environment to attract investors.
"Finally, policy failures and distortions in the critical agrifood and energy sectors must be addressed. In agriculture, reforms are required to unwind the subsidies and price restrictions that lock smallholder farmers into a low-value farming system and encourage resource-intensive and environmentally damaging production practices. Reforms in the energy sector should consolidate progress towards financial sustainability, improve the efficiency of distribution companies (including through increased private participation), and address the very high costs of electricity generation through increased renewable generation.
"The need for such policy shifts has been well established. But experience shows that any reform efforts will face contestation and opposition. The question is whether those with power and influence will take the opportunity arising from the current crisis to do what is needed. It is time for Pakistan to come together in the interests of a brighter, more prosperous, and more sustainable future," Benhassine concluded.
About author: Najy Benhassine is Country Director for Pakistan for the South Asia region at the World Bank Group. An Algerian national, he joined the World Bank Group in Washington D.C. in 2001, after working with McKinsey and Co and teaching at the Swiss Graduate Institute of International and Development Studies in Geneva.
