Overview

  • Pakistan has made significant progress in regaining macroeconomic stability over the past three years. Pakistan has achieved macroeconomic stability in the past three years: the fiscal deficit has shrunk from 8 percent to below 5 percent, international reserves have tripled to over $18b, and the rate of growth has increased by a full percentage point to 4.7 percent.

    Economic indicators in the first half of FY17 suggest that pressures are mounting for both fiscal consolidation and external balances. The current account deficit will more than double in FY19 from 1.1 percent of GDP in FY16. Reserves are forecast to be around $18b by FY19, still well above three months of imports. The fiscal deficit will widen from 4.5 percent of GDP in FY16 to 5.1 percent in FY18, and will decline slightly to 4.9 percent in FY19. Pakistan has also embarked on an ambitious structural reforms program. Implementation record has been mixed. There were early successes in taxation, the financial sector, the business environment (at both the national and provincial levels), and the electricity sector. However, significant reforms undertaken in the electricity sector have stalled since the Government stopped privatization a year ago.

    Circular debt cleared earlier has piled up again nearly to its 2013 levels. There have been efforts to reduce the electricity regulator’s independence. Progress in improving development outcomes have been mixed and investment levels remain very low, at around 15 percent of GDP (both public and private). Maintaining macroeconomic stability and further progress in structural reforms will be necessary to accelerate growth and ensure it is inclusive and sustainable.

    Growth, though volatile and low in some periods, has been quite pro-poor in Pakistan over the past decade and a half. The headcount poverty rate has fallen consistently over this period, from 34.7 percent in FY01/02 to 9.3 percent in FY13/14 (using the latest survey data and the old poverty line). Using incidence curves that plot the growth rate in consumption at each percentile of the distribution, it is evident that growth has been pro-poor in Pakistan through much of this period. Looking at the bottom 40 percent of the population—a measure of shared prosperity—we see a similar pattern. The Government adopted a revised methodology to measure poverty and a new poverty line in 2016. Under the revised poverty line, the poverty head count has declined from 64.3 percent in FY01/02 to 29.5 percent in FY13/14. Our understanding of what has caused this significant decline in poverty remains incomplete. Important contributors are higher GDP growth in the earlier years, strong growth in remittances, effective social assistance programs as well as rapid and ‘hidden’ urbanization which has led to a very vibrant informal sector.

    Pakistan remains one of the lowest performers in the South Asia Region on human development indicators, especially in education and stunting. 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. The spending on health, nutrition, and education, now totaling 3 percent of GDP, significantly lower than most other countries. Increased allocation will only be possible after increasing government revenues. The tax-to-GDP ratio, at 12.4 percent, is one of the lowest in the world and it is still half of what it could be for Pakistan. Continued reforms to broaden the tax base and increase revenues will therefore need to remain a priority. Service delivery is the responsibility of subnational governments, whose capacity varies, but the federal Government needs to play an assertive stewardship role as increased financing has to be accompanied by meaningful improvements in quality of services. A strategy to greatly improve development outcomes would therefore need to combine efforts to increase the level of public spending as well as improving its quality, with a focus on provincial level capacity.

    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 17 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.

    Last Updated: Apr 14, 2017

  • 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, strengthen agricultural markets and productivity, and provide skills training.  
    • 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). At a provincial level, this involves support to better service delivery in cities.
    • 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.

    The CPS envisages an indicative financing envelope of over $13 billion over the CPS period. This includes IDA lending of over $1.1 billion per year (subject to SDR/$ exchange rate) and from IDA Scale-Up Financing, and regional and refugee windows. Improved macroeconomic balances 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.

    The World Bank’s program in Pakistan is governed by its Country Partnership Strategy (CPS) agreed with the government. The World Bank Pakistan portfolio has 29 investment lending projects under implementation with a total net commitment of $5.4 billion. During fiscal year 2016, the World Bank commitments amounted to almost $2.3 billion. FY17 commitments to date are approximately $0.8 billion. IFC’s advisory services program in Pakistan is one of its largest in the region, with 17 active projects and a funding commitment of about $25 million. 

     

    Last Updated: Apr 14, 2017

  • The Bank supports government programs to improve access to education that focus explicitly on the achievement of results. These efforts, including reforms in teacher recruitment and payment of stipends for girls’ attendance, have started to translate into increased enrollment rates. 

    Investing in Education

    Punjab:  The School Education Department is currently in the process of hiring teachers and teacher mentors through a test based recruitment process.  To date, more than 357,000 individuals have applied for positions. The Punjab Education Foundation through its various public private partnership education programs, has enrolled an additional 355,000 children in schools since October 2015.  Overall, the Foundation is currently supporting more than 2.1 million children in low cost private schools and privately managed public schools.     

    Sindh: The government is implementing a comprehensive Education Sector Reform Program to improve governance and accountability in the education sector. A significant reform by the Education department is laying the foundation for evidence based decision making for human resource, school, and budget management. Ensuring all employees in the system are registered in a Human Resource and Management Information System and can be tracked to the place of appointment, with data regularly monitored through the Sindh School Monitoring System and matched on a monthly basis with the Accountant General payroll data are breakthrough reforms.  Through these two systems 45,000 schools and 200,000 employees of the education department can be managed in a better way, with data-based decision making.  The government is also providing the necessary resources to schools through school specific grants and school management committee grants. These funds allow the school to manage minor repairs at the local level, along with ensuring the availability of teaching learning materials and for conduct of co-curricular activities. The government is also conducting annual third party led, large scale assessment of Grade 5 and 8 students to track learning outcomes of children in schools.

    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 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 of Balochistan has received $34 million through the Global Partnership of Education to expand access to quality education. Under this program the government is working very closely with the communities to operationalize new primary schools and upgrade existing schools to higher levels in areas that have no education facility. The remoteness of the communities and security issues in the province are key challenges, and community partnership is key to ensuring the schools are functional and safe places for the children and s teachers. More than 900 school sites have been identified through a third party site verification system, with geographic information system coordinates and confirmations of education needs of the communities.  Communities with higher level of out of school children have been prioritized for new schools.  Female teacher recruitment has been prioritized for the schools through a test based mechanism. More than 200 teachers have been hired for the schools, and training has been provided on early childhood teaching methods. 

    Land records of rural Punjab goes digital

    The Government of Punjab has digitized the province’s rural land records in an effort to improve service delivery and make the records less dispersed. The Land Records Management Information System has been rolled out in all 36 districts of Punjab through 143 Arazi Record Centers.  The biggest achievement is that the project reduces the time required to complete transactions from two months to just 45 minutes. The centers have also helped lower costs, increase transparency, and improve governance.

    Protecting the Poorest

    The Benazir Income Support Program (BISP), Pakistan’s flagship national safety net program, provides income support in the form of predictable quarterly cash transfers of $46 to almost 5.43 million of the country's poorest families (approximately 22 million people). Almost $4.4 billion has so far been disbursed to beneficiaries. BISP has also rolled out the Co-Responsibility Cash Transfer (CCT) program in 32 districts across all provinces and regions, linking cash transfers to primary school education of the beneficiaries’ children. To date over 1.3 million children of BISP beneficiaries have been enrolled in the program. 

    World Bank has been supporting BISP since 2009 through the Social Safety Net Project that ends on June 30, 2017 with a total investment of $210 million. Recently, the World Bank has signed a new Program for Results operation for BISP (National Social Protection Program). The new program with the investment of $100 million will span over the next four years. NSPP aims to strengthen the national social safety net system for the poor to enhance their human capital and access to complementary services.

    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 of 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.

    In 2016, the Bank also prepared and delivered the $120 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 to the government on the design of a potential hydro-meteorological operation aimed to improve early warning, weather, climate and hydrological information in the country. Further, as part of ongoing technical assistance, the Bank is engaged with federal and provincial governments to enhance fiscal resilience to disaster shocks through the development of a national and provincial disaster risk financing strategies, respectively.

    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 in Round I. An estimated 5.7 million people have benefitted so far.  For Round II, $75 million has been mobilized. Of this, $41 million are new contributions and $34 million is the remaining balance from Round I. Round II will focus on governance, service delivery, growth and job creation.

     

    Last Updated: Apr 14, 2017

Api


LENDING

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

*Amounts include IBRD and IDA commitments

MULTIMEDIA



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Pakistan
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Recovering from Crisis

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Additional Resources

Country Office Contacts

20-A Shahrah-e-Jamhuriat
G-5/1, Islamabad
(+92-51) 9090000
mariamaltaf@worldbank.org