Pakistan has important strategic endowments and development potential. The increasing proportion of Pakistan’s youth provides the country with a potential demographic dividend and a challenge to provide adequate services and employment. Read More »
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. The increasing proportion of Pakistan’s working-age population provides the country with a potential demographic dividend but also with the critical challenge to provide adequate services and increase employment.
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 is a reality that affects 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.
Pakistan also faces significant economic challenges. The sharp rise in international oil and food prices, combined with recurring natural disasters like the 2010 and 2011 floods had a devastating impact on the economy. As Pakistan recovered from the 2008 global crisis, its gross domestic product (GDP) grew 3.8 percent in Fiscal Year 2009/2010 (FY09/10). The 2010 floods, with an estimated damage of over $10 billion, caused growth to slow down to 2.4 percent in FY10/11. The Pakistan economy grew by an estimated 3.7 percent in 2011/12, against the pre-flood targeted growth rate of 4.2 percent. Inflation declined, but continued its four-year run in double digits, and the fiscal deficit is also estimated to have reached about 8 percent of GDP, double than budgeted, fueled in part by continuing energy subsidies. On a more positive side, exports remained mildly positive and strong remittances crossed the $13 billion mark for the first time. In addition, recent efforts to remove tax exemptions and broaden the tax base contributed to higher tax revenues, though the revenue to GDP ratio remains low at about 10 percent.
Accelerating progress in human development remains the key underpinning for sustained economic gains. The Net Enrollment Rates in education have been increasing in Pakistan but still lag behind other South Asia countries. Infant and under five mortality rates represent a similar story. Gender disparities persist in education, health and all economic sectors. Pakistan has one of the lowest female labor force participation rates in the region. Nutrition also remains a significant cross-cutting challenge, as 44% of children under five are stunted. Despite the worrying state of education and health, especially amongst the poor, the resource allocation as a percentage of the GDP remained low. Pakistan is ranked as one of the lowest spenders on education and health in the region (at about 2% of GDP). At the current rate of progress, it will be difficult for Pakistan to meet the MDG targets on health and education by 2015.
Poverty gains of over the past decade have been impressive but may be difficult to sustain. Pakistan saw a decline in poverty trends, with the poverty rate falling from 34.5 percent in 2001/02 to an estimated 17.2 percent in 2007/08. Over the past few years there have been signs that poverty levels may have further decreased, despite the downturn in the economy, floods and inflation. These gains might have been supported primarily through remittances, faster than expected recovery of the agricultural output and exports following the floods, and broad economic growth. While Pakistan’s overall level of inequality remains steady and relatively low compared to other developing countries, some of the volatile border regions and some rural areas within the other provinces have a higher than average level of poverty.
Over the past couple of years, greater decision-making authority has been assigned to provincial governments. 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 has been 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, and meeting these challenges will require concerted efforts to enhance sub-national capacity and institutional development, which varies across provinces.
The Bank’s Country Partnership Strategy (CPS) is 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; increasing the availability of lower cost power supply by supporting hydropower and cross-border energy trade; 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.
The World Bank updated the CPS with a Progress Report in 2012 which in consultation with the Government of Pakistan now covers the period up to 2014. The World Bank Group's support to Pakistan is organized around four pillars:
Improving economic governance
Improving human development and social protection
Improving infrastructure to support growth
Improving security and reducing the risk of conflict
To support the CPS pillars, the Bank will remain engaged with a robust program projected at up to $4.0 billion in new IDA/IBRD lending over FY12-14. An increasing portion of the Bank’s portfolio is being managed at the province level, consistent with the recent devolution of responsibilities.
As of March 16, 2013, Pakistan's portfolio consisted of 24 active projects (IDA + IBRD) with a total commitment of $4.89 billion. The Bank manages a Multi-Donor Trust Fund for the conflict affected areas of about $140 million, which provides grants to KP, FATA and Balochistan. In addition, the Bank maintains an extensive and ongoing analytic work program on a wide range of economic and sector specific topics.
The Regional agenda will continue to be a Bank focus. South Asia remains one of the least integrated regions in the world, and this undermines growth efforts. Many of the Bank’s country-specific Pakistan projects in trade and transportation, ports, and power will help regional cooperation. Beyond this, the Bank expects to support increased trade cooperation between Pakistan and its neighbors. This will be particularly important in strengthening the trade corridor with Afghanistan during its transition period. A regional power line (CASA-1000) is also being supported that would connect Central Asia, Afghanistan and Pakistan. A regional seminar on nutrition and a journalist capacity building workshop on regional cooperation was held in Kathmandu, Nepal in June 2012.
The World Bank, Pakistan is helping the Federal and Provincial Governments in implementing various reform programs aimed at encouraging growth, investment, and employment generation. Reforms at the provincial level are specifically aimed at improving delivery of social services like education, health, clean drinking water, and sanitation. These efforts have yielded impressive results in many areas:
• Investing in Education: The Bank supports government programs to improve access to education that focus explicitly on the achievement of results. Between 2004 and 2011, IDA extended over $1.1 billion to support increased investment and reform in the education sector in the two largest provinces in Pakistan: Punjab and Sindh. These efforts, including reforms in teacher recruitment and payment of stipends for girls’ attendance, have started to translate into increased enrollment rates. For example, overall net primary school enrollment in Punjab increased from 45 percent in 2001 to 62 percent in 2008. Female primary enrollment went up from 43 percent to 60 percent.
Similar enrollment results have been achieved in Sindh. Other achievements in Sindh include merit-based recruitment of around 13,000 teachers and 300 new private coeducational primary schools in underserved rural communities which are supported by public cash subsidies of $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.
• Responding to natural disasters: Over the course of the monsoon season in July and August 2010, Pakistan experienced the worst floods in its history. The floods affected 78 districts and nearly 10 percent of Pakistan’s population over a vast geographical area. The Bank has provided strong support for floods recovery, consisting of $300 million in critical import financing, $20 million for highways rehabilitation, and $125 million to finance cash transfers to around 1.4 million flood affected families.
The Bank also provided support to the Government of Pakistan after the earthquake of October 8, 2005. The earthquake left 2.8 million homeless, and 570,000 houses damaged, with 90% requiring total replacement. The Bank provided $400 million for earthquake reconstruction out of which $220 million was for housing reconstruction. 96% (335,000 houses) of the 350,000 houses have been completed under Rural Housing and Reconstruction Program and have also been certified.
• Protecting the poorest: In social protection, the Bank has helped the government in establishing the social safety net systems. The Benazir Income Support Program (BISP) is the country’s national safety net program and the Bank’s support focuses on increasing its targeting efficiency and strengthening its operation. This cash transfer program offers a monthly payment of Rs. 1,000 to qualifying households. In 2011 it is expected to cover about 7 million households or about one quarter of Pakistan’s total population.
• 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 $140 million for the MTDF.
• Supporting rural livelihoods: The Bank has supported Pakistan Poverty Alleviation Fund (PPAF) since 2000 and during this time, the program has facilitated the formation of 80,000 community organizations and provided 1.9 million micro-credit loans, 16,000 community infrastructure schemes, and training support for 232,000 people in enterprise development skills.
The World Bank is also assisting the Government of Azad Jammu & Kashmir (AJK)* in implementing a program to restore vital economic and social infrastructure damaged and/or destroyed by the October 2005 earthquake by financing reconstruction of 201 primary schools, 35 other buildings including government offices, police stations, and vocational training institutes, and 24 rural roads. 190 sub projects including 24 rural roads and 166 buildings are complete. Work on 50 sites is above 80% completed, on 13 sites it is more than 60 % and on remaining seven sites it is about 50% complete.
• Connecting the Poorest: The Bank is working to address Pakistan’s vast urban and rural infrastructure deficits, often cited as the greatest constraint to sustained, rapid growth. Through its ongoing US$ 495.0 million Highways Rehabilitation Project, the Bank is helping Pakistan to improve its road network. Major achievements include:
Road networks in poor condition reduced from 49% to 39.5%
Network-level ride quality (measurement of how bumpy or smooth the road is) improved by 15%
Travel time between Karachi and Peshawar reduced from 47 hours to 42 hours
Fatalities on Grand Trunk Road decreased from 107 to 60 per km.