Overview

  • Pakistan’s economy continued to grow in FY18, reaching 5.8 percent. Growth was driven by higher consumption demand, fueled by accommodative fiscal and monetary policies; resulting in widening macroeconomic imbalances. Current account deficit (CAD) reached 6.1 percent of GDP in FY18, up from 4.1 percent in FY17. The widening CAD reflects the growing trade deficit as exports struggled to catch up with steady acceleration in imports due to high domestic demand. Fiscal deficit widened to 6.6 percent (excluding grants) in FY18, reversing fiscal consolidation efforts in previous years. The main reasons for the fiscal slippage was a large increase in recurrent spending together with low revenue growth (non-tax revenues). 

    The new government took steps to address these imbalances, but outcomes by mid-year suggest that further adjustments will be necessary. Leading indicators for real sector activity suggest a contraction in demand. Large scale manufacturing, which accounts for 65 percent of overall industrial output, contracted by 2.3 percent between July-January FY19. In agriculture, four of the five major crops have witnessed a y-o-y decline in production, due to water shortages and a decline in production area. The exchange rate has continued to depreciate, with a cumulative depreciation of 13.6 percent between July 2018 and March 2019. As a result of exchange rate depreciation, demand side pressures and higher fuel prices, inflationary pressures have increased, and average headline inflation reached 6.8 percent in the period between July 2018 and March 2019 (as compared to 3.8 percent in the same period last year).  In response to higher inflationary pressures, the State Bank of Pakistan has increased the policy rate by a cumulative 425 bps to 10.75 percent since July 2018.

    Current Account Deficit (CAD) reached 3.3 percent of GDP in Jul-Feb FY19 compared to 3.7 percent in Jul-Feb FY18. Overall imports contracted by 1.6 percent (y-o-y) but exports also declined by 0.1 percent (y-o-y) in spite of the exchange rate depreciation. Over the same period, remittances experienced healthy growth, but foreign direct investment declined. By mid-January international reserves had fallen to US$6.6 billion (or 1.3 months of imports). With short term financing from the Kingdom of Saudi Arabia, United Arab Emirates and China reserves increased to US$10.5 billion (or 2.0 months of imports) by end-March 2019. Meanwhile, the government continues to negotiate a support package with the International Monetary Fund. Large increases in debt servicing and defense expenditures resulted in higher fiscal deficit in H1-FY19 which reached 2.7 percent of GDP (compared to 2.2 percent in H1-FY18). The FY19 fiscal deficit is projected between 6.8-7.0 percent of GDP, a slippage of 2.7-2.9 percentage points compared to the budgeted target. 

    The projected poverty rate is expected to continue declining in FY19. Poverty head-count measured using the $1.90 international poverty line is estimated at 3.1 per-cent for FY19, down from 4 percent in 2015 (the most recent official numbers). Poverty at the $3.2 poverty line is estimated to have fallen by approximately 3.4 percentage points to 31.3 percent during the same period; and using the $5.5 poverty line to 72.6 percent (a 2.8 percentage points decline since 2015).

    Growth is projected to decelerate in FY19 and FY20, as the government tightens fiscal and monetary policies. As macroeconomic conditions improve, and a package of structural reforms in fiscal management and competitiveness is implemented, growth is expected to recover from FY21 onwards. Together with the macroeconomic adjustments, there is an urgent need to implement structural reforms to support the growth rebound. Reforms to put the country on a stable growth path include increased exchange rate flexibility, improved competitiveness and lower cost of doing business. On the revenue front, reforms to improve tax administration, widen the tax base and facilitate tax compliance are critical.

     

    Last Updated: Apr 05, 2019

  • The Country Partnership Strategy (CPS) for Pakistan for FY2015-19 was extended to 2020 during a Performance and Learning Review conducted in FY17. The CPS 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. These include:

    Result Area

    Transforming the energy sector: WBG interventions are supporting improved performance of the energy sector by supporting reforms and investments in the power sector to reduce load shedding, expand low-cost generation supply, improve governance and cut losses.

    Supporting private sector development: A mix of budget support, investments and analytical work supports improvements in Pakistan’s investment climate, in overall competitiveness, agricultural markets and productivity, and skills development. 

    Reaching out to the underserved, neglected, and poor: Investments support financial inclusion, micro, small and medium enterprises (MSMEs), women and youth (including through enrollment outcomes), fragile provinces/regions and poorer districts, social protection, and resilience and adaptation to the impact of climate change.

    Accelerating improvements in service delivery: At the federal and provincial levels the Bank supports 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.

    Cross cutting themes for the program include women’s economic empowerment, climate change and resilience, and regional economic connectivity.

    The CPS envisages an indicative financing envelope of over $13 billion in FY15-20. This includes IDA lending of over $6.6 (subject to SDR/$ exchange rate), and allocations from IDA Scale-Up Financing, and regional and refugee windows. 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 WBG has a portfolio of $7.4 billion in Pakistan ($5.2bn IDA, $2bn IBRD, $214mn Trust funds). The portfolio is supporting reforms and investments to strengthen Pakistan's government institutions and capacities, particularly in fiscal management and human development. Partnerships are being strengthened at provincial levels, focusing on multi-sectoral initiatives in areas such as children's nutrition, education and skills, irrigated agriculture, disaster risk management, and urban development. Clean energy and social/financial inclusion also remain major priorities.

     

     

    Last Updated: Apr 04, 2019

  • EDUCATION

    Punjab:   Primary education in Punjab is achieving remarkable results. Between 2017 and 2018, Punjab has managed to increase enrolments by 1 million students, from 11.3 to 12.3 million students. Since 2016, the province also has managed to hire 100,000 teachers through a competitive, meritocratic hiring system. The increase in the number of teachers has reduced the number of schools with fewer than teachers from 23,000 down to 300. In January 2018, the province has adopted an Early Childhood Education Policy, and 11,000 early childhood classrooms have been established. As of today, 2.6 million students are studying in public-private programs led by the Punjab Education Foundation. In the past year alone, 4,000 low-performing public schools have been transferred to PEF. Basic literacy and numeracy also seems to be increasing in the 6-monthly LND exams Math, Urdu and English.

    The year 2017-18 has been declared the year of learning, that reserved an hour per week for basic literacy and numeracy instruction, increased data monitoring based on tablets, and a new hotline where parents can register complaints. The Bank has supported these changes through the PESP-III program. However, huge quality challenges remain in the system, particularly with regards to instruction and international standards. The Bank has an innovative Service Delivery survey in the field to validate what kind of progress has been made and to diagnose what kind of problems remain, focusing on teacher knowledge, classroom instruction practices, parental support and student learning outcomes.

    Sindh: The government is implementing a comprehensive Education Sector Reform Program to improve governance and accountability in the education sector. A special effort is being made to improve access and retention in selected schools through an improvement of infrastructure of approximately 4500 schools, assigning appropriate number of teachers to school to ensure there is a teacher available for every classroom in the school and train teachers and head teachers of the schools to improve the learning environment. These schools are expected to be role models for other schools in the area. The Government has initiated another round of recruitment for more than 6000 teachers, specifically focusing on Science and Mathematics subjects as well as Early Childhood Education to fill the gap of these teachers in the system. The government is providing necessary resources to schools through school specific grants and school management committee grants. These funds allow schools to manage minor repairs at the local level, alongwith ensuring the availability of teaching learning materials and to conduct co-curricular activities. The government is implementing a third party led, annual, 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. The Government has placed more than 900, competitively selected head teachers in schools. The head teachers were trained prior to placement and have initiated school improvement activities in their respective schools.  The schools are monitored on a monthly basis through the Sindh School Monitoring System, allowing the Education Department to make evidence based decisions for education improvements.

    Balochistan: The Government of Balochistan has received $34 million through the Global Partnership of Education to expand access to quality education. The Balochistan Education Project has helped to functionalize more than 900 schools across the province these include more than 700 schools with new or renovated buildings and more than 100 upgraded schools from primary to middle and high. 53,000 children enrolled in the project specific schools with 89% retention of children, Of these 72 % are girls. Almost 700 schools have a comprehensive Early Childhood Education (ECE) Program with trained teachers and ECE specific learning material. More than 1200 project specific teachers have been provided training on ECE, subject content especially mathematics and science and pedagogy. More than 2000 community members around the school sites have been provided training to support monitoring od school construction, ensure children’s participation in education and ensure teacher presence in schools. Real-Time Monitoring of more than 14,000 public sector schools across the province targeting more than 1 million children enrolled in the schools.


    SKILLS

    Punjab government, has a strong focus on skills development and has set a target of 2 million youth being trained within 2 years. Skills development opportunities have expanded rapidly to keep the progress on track. The Punjab Skills Development Program supported by World Bank aims to support employability of youth of Punjab. It has developed more than 30 competency-based learning assessments in priority sectors, with at least 80 public and private institutes offering these courses, and having trained 16,000 graduates. 12 partnership agreements signed with industry for market-based skills trainings. With more 800 students trained in priority sectors of Punjab having an employment rate of more than 50 percent. Increasing access in market relevant trades offered by public and private sector training providers by enrolling 52,000 students. Creating a conducive well-functioning skills sector policy landscape, by supporting reform towards a single and consolidated testing agency. 

    ENHANCING DISASTER RESILLIENCE

    Being one of the most climate-change vulnerable countries in the world and recurrently affected by catastrophes, including the unprecedented 2010 floods which affected over 20 million people, Pakistan’s economy is under additional strain from prevailing and likely future threats by various hazards, being exacerbated by climate change. 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 an ex-post to an ex-ante risk management approach.  Initially, the Bank provided technical assistance to the government to highlight physical and fiscal risks from hazards, including risk assessments of federal and provincial capitals.

    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. As part of pipeline investments, the Bank is preparing the Pakistan Hydromet and DRM Services Project which aims to strengthen Pakistan’s public-sector delivery of reliable and timely hydro-meteorological and disaster risk management services to user departments and communities.

    Further, as part of ongoing technical assistance, the Bank is engaged with federal and provincial governments to improve understanding of seismic risks, and enhance fiscal resilience to disaster shocks through the development of a national and provincial disaster risk financing strategies.

    OPERATING IN CONFLICT AREAS

    The 2009 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) was established in 2010 to support reconstruction and recovery from the impact of the crisis and reducing the potential for escalation or resumption. The MDTF has pooled a total of $270 million between 13 donors to support reconstruction and economic development in the border regions of Khyber Pakhtunkhwa and Balochistan.


    Image

    Last Updated: Apr 04, 2019

Api





PHOTO GALLERY

Pakistan
More Photos Arrow

Additional Resources

Country Office Contacts

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