Pakistan must simplify regulations and make its economic outlook predictable to attract more investment and significantly spur growth, Bloomberg reported a senior official from the World Bank as saying.
The South Asian country can see its annual growth rate accelerate to as much as 8% if it doubles investment and better utilizes its assets and human capital, Martin Raiser, the bank’s vice president for South Asia, said in an interview with Bloomberg.
“If you invest 12% of gross domestic product, don’t expect miracles,” he said. “You’re not going to grow. It’s as simple as that.”
Pakistan’s average investment-to-GDP ratio has fallen below 15% in recent years, the lowest in the region, data from the finance ministry shows. The country’s economy is forecast to grow 3pc this year, according to a Bloomberg survey of economists.
The Washington-based lender last week approved a 10-year partnership framework for Pakistan, which, Raiser says, is meant to help the government make the country’s business climate more stable.
Pakistan’s economy has faced successive boom-and-bust cycles after imbalanced and unsustainable fiscal policies caused funding shortages for critical sectors, including health and education, with almost half of government revenue being spent on debt repayment and defense.
The nation of 240 million people ranks lower in the World Bank’s Human Capital Index than other South Asian countries.
Prime Minister Shehbaz Sharif aims to achieve growth of 3.6pc by the end of June after dodging economic default last year with external help. As part of the International Monetary Fund’s three-year loan programme, he has pledged to raise government revenue and plug financial leaks by restructuring and privatizing state-owned enterprises.
Increasing the tax-to-GDP ratio to 15% is “eminently doable” by slashing exemptions that protect “some special interests” and cracking down on tax evasion and digitalizing the collection system, Raiser said.
