Islamabad:
The World Bank warned on Wednesday that nearly 10 million Pakistanis could face acute food security in the current financial year, with poverty levels expected to rise. The warning came when the bank also revised Pakistan’s economic growth forecast down to 2.7%with reference to tight economic policies that suppress national production.
In its flagship’s half-yearly Pakistan Economic Update Report, the Washington-based lender noted the government that the government is likely to miss its annual budget deficit. In addition, the country’s debt burden is expected to rise both in absolute terms and as a proportion of GDP.
“With climatic conditions affecting the total agricultural production of key crops such as rice and maize, almost 10 million people are expected, mostly in rural areas, to experience high levels of acute food security in FY25,” said the World Bank.
The report focuses on questions that are not often discussed at the official meetings – food security, poverty, unemployment and falling real wages.
The report emphasized that “key sectors for poor farming, construction and low value added services-experienced low or negative growth, which led to stagnant real wages”.
Combined with population growth of approx. 2% are expected to push approx. 1.9 million more individuals for poverty in this financial year. Not only that, the relationship between employment and population is 49.7%, which reflects commitment to low labor market, especially among young people and women, WB said.
The report stated that social protection costs have not kept pace with inflation that limits resources available to the poor for food, health, education and other critical things, with negative consequences for human capital and work productivity.
It said 37% of youth and 62% of women are not in education, employment or education. “Despite the nominal daily wages that almost doubled for low -qualified workers, such as masons, painters, plumbers and unskilled workers, remained real wages stagnant or even slightly reduced,” according to the lender.
As a result, poverty chief, even on the official national poverty line, would rise slightly. The World Bank said that while using the national poverty line of RS3.030 per year. Adult equivalent per Month in 2013-14, or RS8.231 in 2024 awards, the expected poverty head office is 25.4% for this financial year.
Pedding economic growth
The World Bank said that economic growth is expected to remain at 2.7% in this financial year, which is in line with the forecasts of the International Monetary Fund (IMF) and the Asian Development Bank (ADB). This means that the government will miss its 3.6% economic growth target, as Finance Minister Muhammad Aurangzeb had described in the budget as achievable.
Pakistan’s most important challenge is to transform the recent gains of stabilization into economic growth that is sustainable and sufficient for poverty reduction, “said Najy Benhassine, director of the World Bank country of Pakistan.
He emphasized that reforms with great influence to prioritize an effective and progressive tax system, support a market -specific exchange rate, reduce import tariffs to increase exports, improve the business environment and streamline the public sector would signal a strong reform obligation, build trust and attract investments.
The World Bank said growth was expected to be gained in the next financial year at only 3.1% and then to 3.4% by 2027. The three years of growth projections were lower than the government’s annual annual target of 3.6%.
The report stated that inflation was expected to fall to 5% this year, reflecting a muted demand, lower raw material and energy prices and a stable exchange rate.
For this financial year, Pakistan’s ongoing account is expected to make a profit of 0.2% of GDP or $ 800 million, the first annual profit of 15 years, driven by stronger worker transfers, the World Bank said. This will help offset an extended trade deficit as import growth exceeds export growth. The current account is expected to return to a 0.5% loss in the next financial year, it added.
Lack of budget deficit targets
Unlike the government’s budget target of 5.9% of GDP, the World Bank said the deficit is expected to remain at 6.8% of GDP in this financial year. This means that the government will use RS1.1 trillion more than the budget target. The lender said the primary budget balance is expected to reach a profit of 1.9% of GDP in FY25, primarily due to SBP surplus.
It said gross financing needs will remain increased throughout the expected period, reflecting mature short-term debt, refund to multilateral and bilateral creditors and upcoming Eurobond running time. Public debt, including guaranteed debt, is expected to reach 74.6% of GDP in this financial year, up from 72.7% of the last year, the lender said.
Repeat
The World Bank called on Pakistan to restore the function of the Interbank currency market along with the fully market -related exchange rate.
It has also asked to take additional measures with the government’s right size, including eliminating superfluous or unproductive positions or agencies and sought review of the compensation of the public sector, including revenue generation and simplification of benefits in nature to reduce costs and improve transparency.
It underlined the need for implementing parametric pension reforms to significantly reduce future obligations and facilitate the transition to a contribution -based system over time.
“Pakistan’s economy has turned the corner and stabilized. Nevertheless, the economic views remain fragile, and any implementation delays in structural reforms or shifts in economic stabilization can dampen the beginning recovery and intensify external pressure,” said Anna Twum, lead author of the report.
Risks remain high due to increased debt levels, politics and global trading security and exposure to climatic shocks, TWUM said.
The World Bank has also called for the implementation of the newly revised agricultural income tax and reforms in the property valuation to address systematic power underestimation. It applied for reduction in the number of zero-classified items under the fifth schedule, which means introducing more taxes.
The World Bank recommended the elimination of preference treatments under the Income Tax Regulation and carried out ex-ante-cost assessments for new exceptions, evaluating previous exemptions and the institute sunset clauses.
