Gloomy GDP estimate

After months and years of subpar economic performance, the latest World Bank report suggests that Pakistan’s economy actually shrank in the fiscal year 2023. Although the bank’s latest report did cite events beyond our control — such as the 2022 floods and the Ukraine war and related global economic upheavals — the bulk of the blame remained on ‘Pakistani’ factors, from political turmoil to controversial economic decisions. The 0.6% contraction was also blamed for poverty crossing 39% last year, as 12.5 million more Pakistanis fell below the poverty line.

And the report was light on good news, even in its projections. “Careful economic management and deep structural reforms will be required to ensure macroeconomic stability and growth,” according to the top World Bank official in Pakistan. But even with the harsh reforms — some of which have already been implemented — a lot still depends on variables, because Pakistan’s economy is still not in a position to absorb significant domestic or external shocks. At the same time, the dwindling amount of public investment in human development leaves us even more vulnerable to shocks and less capable of quickly recovering, while also reducing long-term growth potential. All this is before we even consider the increasing risk and potential cost of climate-related threats for which we remain woefully unprepared. This is hardly a picture that would restore investor confidence, which is also necessary to bring stability and fuel a recovery.

The World Bank also says stability in the longer term is also dependent on measures that, historically speaking, have been near impossible to implement, either due to political considerations or the cost of adaption, such as slashing tax exemptions and subsidies, reforms related to state-owned enterprises and energy sector reforms. Most governments actually backslided after simply mentioning such reforms, due to near-universal opposition from politically influential landowners and businesses, ensuring that sustainable recovery will perennially remain beyond the horizon.

Published in The Express Tribune, October 5^th, 2023.

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