Growth in Pakistan

After a decade of anemic economic growth, Pakistan’s economy has grown by more than 6.5 percent per year since 2003. While income inequality has increased somewhat, poverty has declined significantly. Exports (in US$ terms) have grown by over 15 percent since 2004.  Investment as a share of GDP increased from 17 percent in 2001/02 to 20 percent in 2005/06.  A wide-ranging program of economic reforms launched in 2000 – fiscal adjustment, privatization of energy, telecommunications, and production, banking sector reform and trade reform – have played a key role in the country’s economic recovery. Granted, they were not only factors. The external environment of low interest rates, abundant liquidity, and robust external demand, has also been favorable for the country's growth. Increased levels of concessional external assistance – including from the World Bank - and debt restructuring, also played a role. And after 2001, increased remittances and the additional external support provided by the US (which some have termed as "the September 11 windfall") helped increase the cushion of external reserves.

Pakistan's economy has shown great resilience in the face of the devastating earthquake, and future growth prospects for the economy are good. To sustain rapid growth over an extended period of time, Pakistan needs to further increase the quantity and quality of investment. For this to happen, it has to sustain reforms to reduce the cost of doing business and encourage productivity of labor and innovation; to invest in public infrastructure and education and health; and address the growing macroeconomic imbalances, especially with regard to the current account.

World Bank's Involvement

The World Bank’s engagement in Pakistan is on helping identify constraints to growth, and to devise ways to remove them. The Bank recently published an economic report on Growth and Export Competitiveness. The Bank will hold a Growth and Competitiveness Conference in December 2006, and will prepare economic reports on tax policy and public expenditure in 2007 and 2008. It has also prepared a series of trade-related policy notes. Maintaining macroeconomic stability – something that Pakistan’s own history reveals has been difficult to achieve, remains an important focus of the World Bank’s work in Pakistan. The World bank is working in partnership with the Government in systemic reforms to improve governance and to improve service delivery, with focus on civil service reform and procurement and financial management reforms. Structural reforms to improve the business environment and governance at the national level have been supported through program support operations – in particular the Poverty Reduction Support Credits. In addition, the World Bank has also compiled Provincial Economic Reports which analyze the Provinces' growth potential, and identify specific policy recommendations for provincial governments to accelerate development.  These reports have been completed for  PunjabNorth West Frontier Province, and Sindh. The report for Balochistan, as well as provincial fiscal policy notes, are under preparation.

A key focus of the Bank’s work in Pakistan is in contributing to inform the policy debate on poverty, in particular on its determinants, trends, and measures to address. The Bank has recently prepared a Poverty Update, and will be preparing a Poverty Assessment in 2007.




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