25th September 2023, Mumbai: Pakistan finds itself in a sobering economic situation, as revealed by the World Bank. Approximately 40% of the country’s population lives below the poverty line, reflecting the dire economic conditions faced by many Pakistanis. This alarming statistic underscores the pressing need for Pakistan to reevaluate its policy decisions, which have often been influenced by vested interests from military, political, and business leaders.
World Bank advises Pakistan to consider taxing
The World Bank’s warning comes at a crucial juncture, just ahead of a new election cycle. It serves as a call to action for the incoming government, urging them to make early, informed decisions to address the economic crisis. To achieve economic stability, the World Bank advises Pakistan to consider taxing its agriculture and real estate sectors. This recommendation is part of a broader fiscal adjustment strategy aimed at stabilizing the economy, which requires adjustments equivalent to over seven percent of the country’s GDP.
Pakistanis struggling with poverty
The latest figures from the World Bank reveal that poverty in Pakistan has risen significantly, with 39.4% of the population living below the poverty line in the last fiscal year. This increase has pushed an additional 12.5 million people into poverty, bringing the total to approximately 95 million Pakistanis struggling with poverty. The World Bank’s policy notes, prepared in collaboration with various stakeholders, outline priority areas for reform. These include addressing low human development, tackling the unsustainable fiscal situation, reducing over-regulation in the private sector, and reforming the agriculture and energy sectors.
Pakistan’s current economic situation
One of the key proposals put forth by the World Bank is to immediately increase the tax-to-GDP ratio by five percent while simultaneously cutting expenditures by approximately 2.7 percent of GDP. These measures are intended to guide Pakistan toward a more sustainable and fiscally responsible economic path. Tobias Haque, the WB’s lead country economist, expressed deep concern about Pakistan’s current economic situation. He emphasized that the country faces not only economic challenges but also significant human development crises. Haque stressed that Pakistan is at a critical juncture where substantial policy changes are necessary.
Pakistan’s economic challenges
In particular, the World Bank’s policy recommendations highlight the need to strengthen government revenues by withdrawing tax exemptions and shifting the tax burden to the real estate and agriculture sectors. These measures are aimed at improving the revenue-to-GDP ratio by five percent, a crucial step in addressing Pakistan’s economic challenges the World Bank’s sobering assessment underscores the urgent need for Pakistan to address its economic crisis through bold policy reforms. The upcoming elections provide an opportunity for the country to chart a more sustainable economic path, alleviate poverty, and ensure the well-being of its citizens.
By Yashika Desai