2000-21 period: World Bank says Pakistan’s 3.1pc growth rate among lowest in S Asia

ISLAMABAD: In Pakistan investment has been subject to pronounced boom-bust cycles over the past two decades, with growth averaging only 3.1 percent a year in 2000-21, among the lowest average growth rates in South Asia Region (SAR), says the World Bank.

The World Bank in its latest report ‘Falling Long-Term Growth Prospects Edited by Trends, Expectations, and Policies’ stated that in Pakistan, to improve macroeconomic stability, the functional and administrative autonomy of the central bank has been strengthened, government borrowing from the central bank has been prohibited, and price stability has been established as monetary policy’s primary objective.

It further stated that in Pakistan, priorities to raise potential growth include improving macroeconomic stability (avoiding destabilizing boom-bust cycles), increasing international competitiveness, and promoting equity and inclusion.

Other policies beneficial to growth could include strengthening insolvency arrangements and creditor rights, improving the financial viability of the energy sector, and strengthening revenue mobilization and spending efficiency to better fund growth promoting public investment.

The outlook for potential growth in the remainder of this decade and beyond is highly dependent on repercussions of the COVID-19 pandemic and climate change. While the impacts of both are highly uncertain, they will be almost entirely negative, with risks that they could be severely adverse. Policies to address these challenges are the key to ensuring sustainable growth.

In Pakistan, investment has been subject to pronounced boom-bust cycles over the past two decades, with growth averaging only 3.1 percent a year in 2000-21, among the lowest average growth rates in SAR. In 2011-21, investment growth peaked in fiscal year 2014-15 at close to 16 percent and remained high for several years.

The 2015 surge mainly reflected the China-Pakistan Economic Partnership infrastructure project and the construction of a gas pipeline from the Islamic Republic of Iran. The former project is part of China’s “One Belt, One Road” initiative, and consists of a network of highways, railways, and pipelines to connect Western China to the Arabian Sea through the Gwadar Port in Pakistan.

Largely reflecting the impact of the pandemic, investment contracted by 17 percent in the two fiscal years to end-June 2020, and the recovery since then has been anaemic.

Government estimates for fiscal year 2021-22 suggest that investment was still 11 percent below its fiscal year 2017-18 peak. Severe flooding in 2022 is forecast to set fixed investment back even further in the next two years.

In Bangladesh, India, and Pakistan, entry and administrative barriers have hampered investment in construction, finance, retail and wholesale trade, telecommunications, and health care, the report noted.

Copyright Business Recorder, 2023