The World Bank (WB) urged Pakistan implement the much-needed fiscal changes on Tuesday, describing them as “critical” for economic stability and long-term economic growth. These reforms include reducing tax exemptions and expanding the tax base. When introducing “Pakistan Development Update (PDU): Restoring Fiscal Sustainability,” WB Country Director for Pakistan Najy Benhassine stated that “careful economic management and deep structural reforms will be required to ensure macroeconomic stability and growth.” He stated that “it is imperative that critical reforms are undertaken to build the fiscal space and public means to invest into inclusive, sustainable, and climate-resilient development” in light of the record-high inflation rate, rising electricity prices, severe climate shocks, and lack of public resources to finance human development investments and climate adaptation.
“In Pakistan, growth is forecast at 1.9% in FY2024, slightly below the April projection, assuming continued implementation of reforms and supportive macroeconomic policies, recovery from flood-induced supply shocks, and improving external conditions,” the report concluded. The country’s estimated growth rate for FY2023 was reduced by the report from 0.6% to 0.3% (from a forecast in April). The updated prediction, according to the research, anticipates a minor uptick in demand, with private consumption and investment increasing by roughly 3% and 5%, respectively. Demand will be hampered by tighter fiscal and monetary policy as well as by double-digit inflation. However, the implementation of the economic adjustment programme and the likelihood of a smooth general election should increase confidence, and the relaxation of import restrictions should encourage investment while budgetary restraints limit consumer spending.
