Pakistan has a population of over 162 million, with over 60 percent living in rural areas. The country continues to under-perform as compared to other countries at similar levels of per capita income in terms of economic growth and social development. Particularly, Pakistan lags behind comparative countries in nutrition, literacy, gender equity, and access to health facilities and clean water. Social and human development is constrained by a lack of reliable and sustainable livelihood opportunities.
Political: Pakistan has faced significant political, economic and constitutional challenges over the past four years. These include continuing pressures of coalition politics, militancy crises and consequent violence in many parts of Pakistan, recurring natural disasters like the 2010 and 2011 floods, devolution of increasing responsibilities to the provinces, and a difficult economic situation. The Senate elections were held in March 2012 and General elections are due in 2013.
The Eighteenth Constitutional Amendment has devolved a number of key functions to the provinces. In total, functions in seventeen federal ministries have been devolved, including Agriculture, Education, Environment, and Health. In addition a greater share of revenues (57.5 percent) will be passed to the Provinces through the National Finance Commission Award (NFC) in order to enable them to perform these functions. As expected, the devolution has posed institutional and capacity challenges at the provincial level, some dispersal of retained functions at the federal level, and requisite expenditure rationalizing under tight fiscal space.
Economic: As Pakistan recovered from the 2008/09 global crisis, its GDP grew 3.8 percent in 2009/10, and it was expected to increase to 4 percent in 2010/11. Inflation was also expected to return to single-digits in 2010/11. Instead, economic activity slowed down due to the devastating 2010 floods, exacerbated by a hike in food and fuel prices related to global trends that increased inflation rates to above 14 percent between August 2010 and February 2011. As a result, the real Gross Domestic Product (GDP) growth rate in 2010/11 was 2.4 percent and inflation (consumer price index CPI) remained stubbornly high in the double digits (13.7 percent) for the fourth year in a row.
GDP growth rate has recovered and is forecasted at around 3.8% this year, and inflation is 12 percent. The external situation has come under pressure with a projected moderate current account deficit (2.1 percent of GDP), a significant fall in financial flows and sizable debt repayments. On the positive side, recovery from Sindh floods damage has been faster than expected, tax revenues have reverted to positive growth and remittances remain strong.
A number of critical challenges that Pakistan needs to address to accelerate growth are:
• Weak revenue mobilization;
• Poor composition and efficiency of public expenditure;
• Inadequate and unreliable infrastructure;
• Low level of human development
• Conflict and insecurity;
• The imminent demographic bulge, which would require jobs for a young, growing and increasingly urbanized population; and
• Poor and deteriorating level of governance in a context of accelerated decentralization to provincial governments.
The Government’s New Framework for Growth Strategy (NFGS) launched in June 2011 sets out priorities for reviving the economy in the medium term. The Government has outlined a comprehensive plan to accelerate economic recovery under the NFGS, which identifies low productivity associated with weak economic governance as the main constraint to growth. It sets out an ambitious agenda under six thematic areas to address this constraint: Competitive Markets, Openness, Cities, Connectivity, Youth Development and Governance. Successful implementation of the strategy can help the country improve its stabilization and growth prospects in the coming few years, reduce poverty and provide jobs for some 8,000 people that come to the labor market daily.
The Bank’s Country Partnership Strategy (CPS) and now the Country Partnership Strategy Progress Report are directly linked to Pakistan’s own development vision. The Bank’s support is focused on, inter alia, helping the country maintain economic stability by addressing critical long-term constraints to growth; assisting the government to put in place a safety nets system that adequately and effectively protect the poor from economic shocks; and supporting education reform programs to increase school participation, reduce gender and rural-urban disparities, and improve quality and governance. The Bank is also helping Pakistan cope with the consequences of conflict while reducing the prospects of future conflicts through its engagement in the country’s border areas.
Investing in Education: Since 2006, IDA has extended over US$1 billion to support increased investment and reform in the elementary education in Balochistan, Punjab, and Sindh, and recently in the tertiary education and skills sectors. For instance, the Punjab Education Sector Project supports provision of stipends to 380,000 female students in grades 6-8, free textbooks to all students in public schools, improved access to quality education for over 857,096 students (52 percent girls) in 1,768 low cost private schools and capacity support to 54,000 school councils.
Sindh has seen an increase in its rural female-male primary net enrolment rate ratio from 61 percent in 2007 to 72 percent in 2011. Merit-based recruitment of around 13,000 teachers and 450 new private coeducational primary schools in underserved rural communities are supported by public cash subsidies of US$4–6 per student per month conditional on free schooling and stipulated school quality standards. These schools have over 26,000 students and evidence suggests that the school participation rate has increased from 30 percent to 80 percent in these communities, and that gender disparity in school participation has been eliminated.
Under the Balochistan Education Support Project, over 50,000 students have been enrolled in community and public-private partnership schools. Over half of those enrolled attend one of 635 community schools set up by the Balochistan Education Foundation (BESP), which have completed 3 years of successful operation in remote areas of Balochistan. Forty-four percent of these students are girls. The current enrollment of BESP supported schools contributes about 6 percent to the overall net enrollment rate of the province.
Social Assistance and Support to the Poorest and Vulnerable: The Bank has helped the Government of Pakistan in establishing a national social safety net system for objectively targeting the poor and providing them a well coordinated package of assistance. The Bank's support to Benazir Income Support Program (BISP)- the largest safety net program in South Asia - has helped in rolling out door-to-door census by using the Poverty Scorecard as the targeting instrument. As of today, more than 27 million households have been surveyed, about 5.95 million families have qualified whereas 3.6 million families are receiving the income support in the form of monthly cash benefits of PRs 1000 (US$12) per month. In addition, a conditional cash transfer program, linked with primary education of beneficiaries' children is also being launched in the current financial year. In the next 3 years, BISP is expected to cover about 7 million poorest families or about one quarter of Pakistan’s total population for providing various benefits under the program. The Government has started to use the PSC database as the national registry to improve the pro-poor orientation of various social sector programs at the federal and provincial level, which will go a long way in improving the efficiency in the service delivery.
The Bank is also helping develop and institutionalize a National Disaster Response Action Plan through cash transfers in the early recovery phase. A Floods Emergency Cash Transfer (FECT) Project is helping the Government in reaching more than one million households (roughly 9.5 million people), affected by 2010 floods. The operational mechanisms for both BISP and CDCP are strengthened through the use of innovative technologies; payment system; and monitoring, control and accountability mechanisms.
Connecting the Poorest: The Bank is working to address Pakistan’s vast urban and rural infrastructure deficiencies, often cited as the greatest constraint to sustained, rapid growth. Through its ongoing US$495 million Highways Rehabilitation Project, the Bank is helping Pakistan to improve its road network. Major achievements include: (a) road network in poor condition reduced from 49% to 39.5%; (b) network-level ride quality (measurement of how bumpy or smooth the road is) improved by 18%; (c) travel time between Karachi and Peshawar reduced from 47 hours to 39 hours; (d) fatalities on Grand Trunk Road decreased from 107 to 39 per 100 km.
Supporting Rural Livelihoods: The Bank has supported Pakistan Poverty Alleviation Fund (PPAF) since 2000 and during this time, the program has facilitated the formation of 316,000 community organizations/groups in more than 90,000 villages/rural and urban settlements, provided 5.04 million micro-credit loans, completed 24,800 community infrastructure schemes, supported 1,500 health and education facilities, and provided training support for 480,100 people in enterprise development & managerial skills and transferred productive assets to 5,900 families.
Operating in Conflict Areas: The conflict in Khyber Pakhtunkhwa (KP) and the Federally Administered Tribal Areas (FATA) led to one of the worst security crises in Pakistan’s history, displacing millions of people and severely disrupting lives, livelihoods, and the provision of public services. The Bank is now administering the Multi-Donor Trust Fund (MDTF) for KP, FATA and Balochistan, which supports the implementation of a program for reconstruction and development aimed at facilitating the recovery from the impact of the armed conflict and reducing the potential for escalation or resumption. Ten donors have contributed a total of US $140 million for the MTDF. In 2011, The ‘Round 1’ projects financed under MDTF were selected after extensive deliberations because of their potential to deliver quick and tangible results on the ground. There are ten projects financed through the MDTF representing commitments of US$ 130 million. These projects are at different stages of the project cycle. In addition, one piece of analytical work, intended to build capacity of the Provincial Reconstruction, Rehabilitation and Settlement Authority (PaRRSA), has been delivered to the government.
The World Bank works closely with a large number of donors. Partners include Asian Development Bank (ADB), the European Union (EU), United Nations (UN), USAID, United Kingdom’s Department for International Development DFID and other bilateral partners.
A good example of exploiting synergies with partners is the Bank’s work with DFID, EU, and the Canadian International Development Agency (CIDA), around the medium term education sector reform programs of Punjab and Sindh.
Post-crisis support for KP and FATA and Balochistan is a priority where the Bank from the very start has sought enhanced coordination among all interested partners. The MDTF for the border regions aims to facilitate harmonization of donor programs with government’s priorities as well as a mechanism for enhanced donor coordination across sectors in line with strategic priorities agreed between donors and government. Australia, Denmark, the European Union, Finland, Germany, Italy, Sweden, Turkey, UK, and the USA have agreed to pool a total of $140 million through the Fund to support these reconstruction activities.
Toward the Future
The Bank is deepening its engagement on social protection, community-led development, water management, agriculture, energy, and infrastructure, while maintaining strong programs in education, and irrigation.
Recognizing the challenges and uncertainties facing Pakistan in the coming few years, the Bank’s strategy emphasizes a more focused prioritization on key outcomes with flexibility to enable the Bank Group to meet emerging challenges and opportunities.