Pakistan has important strategic endowments and development potential. The country is located at the crossroads of South Asia, Central Asia, China and the Middle East and is thus at the fulcrum of a regional market with a vast population, large and diverse resources, and untapped potential for trade.

Pakistan’s increasing working-age population provides the country with a potential demographic dividend but also with the critical challenge to provide adequate services and jobs.

Pakistan faces significant economic, governance and security challenges to achieve durable development outcomes. The persistence of conflict in the border areas and security challenges throughout the country affect all aspects of life in Pakistan and impedes development.

A range of governance and business environment indicators suggest that deep improvements in governance are needed to unleash Pakistan's growth potential.

Helped by cheap international oil prices and steady implementation of its reforms program, economic conditions have improved. The improved economic growth prospects has led rating agencies (Moody’s, S&P) to improve their outlook for Pakistan over the past year. Growth is slowly recovering supported by a favorable slump in international oil prices and fast-growing remittances, with GDP growth accelerating to 4.2 percent in FY15 and expected to pick-up to 4.5 percent in FY16.

Economic growth is showing signs of sustained recovery aided by falling commodity and fuel prices, increased energy availability and improved security conditions. Preliminary data for the first half of FY2016 show industrial growth accelerating on the back of higher activity in large-scale manufacturing and construction, the latter being driven primarily by initiation of China Pakistan Economic Corridor (CPEC) infrastructure and energy projects.

The improved industrial performance is expected to compensate, to some extent, the weather setbacks observed in the agriculture sector. Moreover, services sector is expected to also grow led by the financial sector, substantial automobile retail sales, increased port activity, and higher telecom profits; although wholesale and retail trade is yet to improve.

Despite some gains Pakistan’s low human development indicators undermine its labor force productivity and economic growth. Pakistan ranks 147 out of 188 countries in the 2015 Human Development Index (HDI) with most indicators lower than most countries in South Asia. Access to education remains low and completion rate for primary education is among the lowest in the world. In FY2014 public spending on education was 2.1% of GDP which reflects on the quality, poor teaching and learning outcomes and inadequate infrastructure.

Although some provinces (Punjab) have made headway in reducing the gender gap, at 67% girls’ participation at primary level lags 10 percentage points behind boys’. Public spending on health was 0.8% of GDP in FY2014, making Pakistan one of the lowest spenders worldwide. Health outcomes have improved but at a slow pace while nutritional outcomes have not improved over the last two decades, and have even deteriorated for some indicators. The 2011 National Nutrition Survey estimated that the rates of child stunting have not changed since 1965 with 45% of children being stunted, 16% of Pakistani children under 5 suffer from acute malnutrition.

According to official statistics, Pakistan has made substantial progress in reducing poverty. The Government of Pakistan has recently adopted a revised poverty line. Using the revised poverty line, the headcount poverty rate has declined from 64.3 percent in FY01/02 to 29.5 percent in FY13/14. The number of people around the poverty line remains high, which results in significant vulnerability to poverty. This steady decline in poverty has occurred despite periods of moderate growth. Growth incidence curves illustrate the pro-poor nature of Pakistan’s growth with consumption of the poorest growing faster than mean consumption.

However, the drivers of this process are not well understood. Large remittances, concentrated among relatively poor households, are a vital source, but growing ‘hidden’ urbanization and a burgeoning informal sector could be equally important.

Last Updated: May 17, 2016

The World Bank Group's Country Partnership Strategy (CPS) for Pakistan for FY2015-19 was formulated after an extensive, country-wide consultations process with a diverse set of stakeholders. It is structured to help the country tackle the most difficult—but potentially transformational—areas to reach the twin goals of poverty reduction and shared prosperity.

The four results areas of the CPS are anchored in the Government’s framework of 4Es: Energy, Economy, Extremism and Education; and the initial priorities of the upcoming Vision 2025.

Result Areas

  • Transforming the energy sector: The World Bank Group (WBG) is committed to supporting reforms and large investments in the power sector to reduce load shedding, expand low-cost generation supply, improve governance and cut losses.
  • Supporting private sector development: The WBG will aim to expand policy-based support for strengthening the business environment, including in the provinces, to improve competitiveness and expand investment, improve productivity of farms and businesses, and make cities more growth friendly to create productive and better jobs (especially for youth and women).
  • Reaching out to the underserved, neglected, and poor: This requires a stronger focus on micro, small and medium enterprises (MSMEs), women and youth, fragile provinces/regions and poorer districts, social protection, and resilience and adaptation to the impact of climate change.
  • Accelerating improvements in services: The pace of improvement is far too slow. At the federal and provincial levels this means increasing revenues to fund services and setting more ambitious stretch targets for areas that are not producing change fast enough (especially education and health).
  • Leveraging regional markets: Interwoven with the four results areas, this cross-cutting program focuses on energy and trade, including critical building blocks of an integrated regional electricity market in South Asia with power transmission links to Central Asia and India; sub-regional collaboration; and other opportunities to capture the potential of cross border trade between Pakistan and its neighboring countries. Sustained regional cooperation has the potential to add 2 percent to Pakistan’s GDP per year, help create viable transit corridors, and contribute to overall stability in the region.

The CPS envisages an indicative financing envelope of about $11 billion over the CPS period. This includes an IDA lending of about $1.1 billion per year (subject to SDR/$ exchange rate). Pakistan could also benefit from additional regional IDA allocations, particularly in trade and energy.

Improved macroeconomic balances have made Pakistan eligible for IBRD lending, these include foreign exchange reserves equal to at least 2½ months of imports of goods and services and a stable or declining public debt to GDP ratio. IBRD lending could be up to the limit of $500 million a year or a maximum of $2 billion in total over the CPS period.

The IFC will also expand its efforts to bring in more private capital, investing $500 million–700 million a year from its own sources and mobilizing another $50 million–100 million per year from other investors. Altogether with MIGA and MDTF, the financing envelope would represent a 20 percent increase over the last CPS period.

The World Bank Pakistan portfolio has 26 investment lending projects under implementation with a total net commitment of $4.99 billion. To date, we have committed over $5.6 billion in Pakistan, including $1.2 billion during the 2015 fiscal year. IFC’s advisory services program in Pakistan is one of its largest in the region, with 13 active projects and a funding commitment of over $20 million.  

Last Updated: May 17, 2016

Investing in Education

Punjab: in 2014-15, nearly 34,000 teachers in 36 districts were hired through testing and nearly 100% of underperforming primary schools received advisory support for teachers.  Punjab also relocated teachers across the province based on school needs. 

The Punjab Education Foundation’s Education Voucher Scheme has provided stipends to nearly 300,000 poor children. This, in addition to other programs, helped enroll over 1.3 million children in low-cost private schools.   

Sindh: the government is implementing a comprehensive Education Reform Program to improve governance and accountability in the education sector. Nearly 90% of all employees (teaching and non-teaching) had their credentials verified -- through biometric thumb impressions-- and compared against the Accountant General payroll database. This is an important step to correct the issue of ghost or fake employees.

The government is also implementing a school consolidation program to ensure school resources are efficiently utilized. A recruitment process has been completed to promote leadership in education and bring onboard more than a 1,000 qualified head teachers and principals. More than 16,000 teachers, recruited through a test-based recruitment system, are working in schools.

Balochistan: the government has built or rehabilitated schools and, with community support, enrolled more than 38,000 boys and girls in school.  123 shelter-less primary and middle schools have been upgraded to better infrastructure while 225 schools were provided missing facilities under the Promoting Girls’ Education in Balochistan (PGEB) Project.  Early Childhood Education (ECE) learning kits were also provided to these schools along with teacher training. 

The Government of Balochistan has received an additional $34 million through the Global Partnership of Education to further expand access to quality education

Protecting the Poorest

The Benazir Income Support Program (BISP), Pakistan’s flagship national safety net program, provides income support in the form of predictable monthly cash transfers of $15 to almost 5.2 million of the country's poorest families or nearly 20 million people. Over $3.5 billion has so far been disbursed to beneficiaries.

The program aims to reach 5.3 million families in the next financial year.

BISP has also rolled out the Co-responsibility Cash Transfer (CCT) program, linking cash transfers to primary school education, which is currently being implemented in 32 districts in all provinces and regions. To date over 1.3 million children have been enrolled in the program, of which over 1.15 million children have taken admission in schools. 

Supporting Rural Livelihoods

Since its inception in April 2000 until December 2015, the Pakistan Poverty Alleviation Fund (PPAF) has disbursed $236 million to 129 Partner Organizations in 130 districts across the country. 7.7 million individuals received loans, 61% of them are women living in rural villages and urban settlements.

More than 35,000 water and infrastructure projects have been initiated; 2,000 health and education facilities supported; 284,000 individuals received skills/entrepreneurial trainings; 26,279 individuals including women and youth received business training under Waseela-e-Haq National & Waseela-e-Haq Sindh program of BISP;  29,500 persons with disabilities rehabilitated.

Enhancing Disaster Resilience

Since the 2005 Pakistan earthquake, which led to nearly 73,000 deaths and caused damages to over 570,000 houses, the Bank has been supporting the Government of Pakistan in shifting from a response-based to a more pro-active risk management approach.

The urgency and importance to address Disaster Risk Management (DRM) holistically was further highlighted in the aftermath of the unprecedented 2010 floods, which affected over 20 million people and almost 20% of the total landmass of the country.

Initially, the Bank provided technical assistance to the government to highlight physical and fiscal risks from hazards. This included undertaking risk assessments for federal and provincial capitals, as well as a national-level fiscal disaster risk assessment report.

In parallel, the Bank also used grant resources to build the capacity of Provincial Disaster Management Authority Balochistan.

Following the floods of 2014 and at the request of Government of Pakistan, the Bank prepared the $125 million IDA-funded Disaster and Climate Resilience Improvement Project (DCRIP) to support restoration of flood protection infrastructure and strengthen government capacity to manage disasters and climate variability in Punjab and Northern Districts.

The Bank is preparing a $100 million IDA-funded Sindh Resilience Project (SRP) to mitigate flood and drought risks in selected areas, and strengthen Government of Sindh's capacity to manage natural disasters. The Bank also continues to provide technical assistance, particularly to analyze gaps and prioritized needs to improve the overall hydro-meteorological observation network in the country.

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 an estimated two million people and severely disrupting lives, livelihoods, and the provision of public services.

A Multi-Donor Trust Fund (MDTF) supports the implementation of a program for reconstruction and development aimed at facilitating the recovery from the impact of the crisis and reducing the potential for escalation or resumption. Donors have contributed a total of $183 million for the MTDF. An estimated 5.4 million people have benefitted so far. As Round I of the MDTF comes to a close, it is expected that donors will pledge $100 million for the first year of implementation. 

Last Updated: May 18, 2016


Pakistan: Commitments by Fiscal Year (in millions of dollars)*

*Amounts include IBRD and IDA commitments