World Bank's assessment

The World Bank's Country Director Patchamuthu's assessment of the Pakistan economy appears to be more in synch with the views of local economists as opposed to the government. He downgraded the growth rate of the economy to 4.5 percent in line with the International Monetary Fund's assessment, in contrast to the 5.5 percent budgeted by the government for the current year which was recently downgraded to 5 percent by the Finance Minister as a consequence of the failure to meet the cotton output target by 2 million bales.

This growth rate, the Country Director pointed out, trails behind other South Asian nations where the average is projected at 7 percent. The reason for our lower growth rate is, as per independent local economists, the inordinate focus of the Ministry of Finance on reducing the budget deficit. The decision of the Ministry of Finance, prompted by the IMF subsequent to taking the loan of 6.64 billion dollars in September 2013, was to bring the budget deficit to sustainable levels - from a high of nearly 8 percent in 2013, though part of the rise in the deficit is attributable to the then newly elected PML-N government to retire the inter-circular energy debt through borrowing, to around 5 percent last year. But, so argue local economists now that the deficit is sustainable the focus must shift to growth. It is unfortunate that at present the government continues to prioritise reducing the deficit which accounts for recent reports that public sector development programme has received only 60 percent of the amount budgeted with less than two months remaining for the end of the year.

Patchamuthu urged faster reforms in the energy sector which, he maintained, has suffered from decades of under investment and disturbingly added "to me the whole story around power sector reforms is still only half done." This is at odds with the IMF's assessment in the 10th mandated review that the "power sector over-performed during the quarter under review". The over-performance was not in reducing the stock of past arrears as an attached table indicated that in the second quarter (October-December) the target was 287 billion rupees while the actual was 326 billion rupees. With respect to the flow of arrears the document notes that the target was 24 billion rupees while actual was 13 billion rupees or the authorities failed to meet the target by 11 billion rupees. However, in contrast to the first quarter (June-August 2015) with line losses at 22 billion rupees and non-recoveries 37 billion rupees the second quarter performance improved considerably to 8 and 6 billion rupees respectively, though the non-recoveries target was missed by 6 billion rupees.

The Country Director noted that the government intends to meet the energy shortfall by 2018 through the 30 billion dollar projected investment by China under the China-Pakistan Economic Corridor (CPEC). What he failed to mention was that Pakistan simply does not have the absorption capacity for around 15 billion dollars per annum and the inflow may have to realistically be staggered over a period of around 10 years. He also lamented the stalling of the privatisation process of distribution companies, as per a directive from the Prime Minister, though one would be hard-pressed to support the concept of privatising Discos that would lead to private sector monopoly.

And lastly, the World Bank Country Director noted that in 2014 Pakistan was ranked as the second lowest nation in the world, after Yemen, in terms of gender equality. And urged the government to focus on this which, he declared, would also lead to higher growth. In this context, it is relevant to note that our ranking with respect to gender inequality may imply that the contribution of women to the economy is considerably lower than in other countries but there is also an element of gross under reporting of women's contribution to the GDP. Be that as it may, the focus of the government remains on mainstreaming development with no focus on women development and given our appalling ranking it may be appropriate for the government to focus on women development in the budget for 2016-17.