The ongoing political uncertainty in the country is a serious threat toPakistan’s economic well-being according to the World Bank.
The World Bank’s (WB) Pakistan Development Update that was released onTuesday highlights that sustaining the economic recovery requiresaddressing long-standing structural weaknesses of the economy and boostingprivate sector investment, exports and productivity. Macroeconomicadjustment measures, specifically fiscal consolidation to complement theongoing monetary tightening, are urgently needed. Poverty is estimated tohave declined but rising food and energy inflation have diminished the realpurchasing power of households.
Pakistan’s economy enjoyed a strong recovery and grew 5.6 percent in FY21following measures taken by the government to mitigate the adversesocio-economic impacts of the pandemic.
While economic activity maintained its momentum from July to December 2021,high demand pressures and rising global commodity prices led todouble-digit inflation and a sharp rise in the import bill during thisperiod. These developments have had an adverse impact on the rupee.Moreover, long-standing structural weaknesses of the economy, including lowinvestment, low exports, and low productivity growth pose risks to asustained recovery.
Read Top Stories
The report highlights that with economic recovery and improved labor marketconditions, poverty — measured at the lower-middle-income class povertyline of the $3.20 Purchasing Power Parity 2011 per day — declined from 37percent in FY20 to 34 percent in FY21. However, rising food and energyprices are expected to decrease the real purchasing power of households anddisproportionally affect poor and vulnerable households that spend a biggerportion of their budget on these items.
WB Country Director for Pakistan, Najy Benhassine, said that “Pakistan’seconomic recovery after the COVID-19 crisis indicates that the country hasenormous potential to overcome challenging economic situations”.link