The World Bank has expressed deep concern about Pakistan’s economic situation and has urged the country to take immediate action to address its economic challenges.
They recommend implementing significant fiscal adjustments, targeting a 7% reduction in the size of the economy. This includes measures such as increasing the tax-to-GDP ratio by 5% and reducing expenditures by 2.7% of GDP.
Furthermore, the World Bank has highlighted the alarming increase in poverty in Pakistan, which rose to 39.4% in the last fiscal year, affecting 12.5 million additional people, bringing the total number of impoverished individuals to 95 million.
The World Bank’s draft policy notes emphasize the need for reforms in several key areas, including human development, fiscal sustainability, private sector regulations, agriculture, and energy sectors. They propose withdrawing tax exemptions and increasing taxes in areas previously considered untouchable, such as real estate and agriculture.
The World Bank also recommends using CNIC for transactions, withdrawing income tax exemptions for power generation and real estate investments, simplifying the tax system, increasing excise duties on cigarettes, and eliminating tax exemptions on machinery imports for power generation and pharmaceuticals. Additionally, they suggest lowering the income tax-free threshold for the agriculture sector and harmonizing land valuation systems.
On the expenditure side, the World Bank advises reducing energy and commodity subsidies, implementing a single treasury account, and temporarily adopting austerity measures. They also propose reducing federal development and current expenditures on provincial projects, cutting spending on loss-making entities, and improving the quality of development spending.
In conclusion, the World Bank calls for a comprehensive and concerted effort to address Pakistan’s economic challenges, emphasizing the need for domestic solutions and consensus-building among political parties, businesses, civil society, and other stakeholders.