• Saturday, February 24, 2024

Business

World Bank calls for overhaul of Pakistan’s economic policies

By: Pramod Thomas

PAKISTAN’s current economic model is not working, a top World Bank official has said, underlining that the cash-strapped nation must change policies that have plagued development and benefited only a few.

The remarks by World Bank country director Najy Benhassine came in a Policy Vision article, published in the latest UNDP publication.

Pakistan’s current economic model is not working since it has fallen behind its peers, significant progress in poverty reduction has now started to reverse, and the benefits of growth have accrued to a narrow elite, Benhassine said.

“There is a 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,” the Dawn newspaper quoted Benhassine as saying.

Pakistan is heavily exposed to climate change, with the potentially devastating impacts of climate shocks and natural disasters already apparent, he said in Development Advocate Pakistan, the UNDP’s quarterly development magazine.

Benhassine emphasised that policy failures and distortions in the critical agri-food 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 World Bank official said.

The need for such policy shifts has been well established, but experience shows that any reform efforts will face 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,” he stressed.

He said fiscal management must be drastically improved, and 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 cutting regressive and distortionary subsidies and reducing 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, he suggested.

The World Bank official further said that improved living standards will require stronger growth and a more dynamic and open economy.

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 side, will remain a prerequisite to ensure a more stable economic environment to attract investors, Benhassine said.

(PTI)

 

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