The World Bank in its latest report, “Pakistan Development Update” released last week has said that Pakistan’s economy is showing signs of recovery, but the current recovery is neither sustainable nor sufficient to reduce poverty. According to the WB report, growth remains insufficient to reduce poverty, with 40 per cent of Pakistanis now living below the poverty line. Further, macroeconomic risks remain very high amid a large debt burden and limited foreign exchange reserves.

The World Bank in its report says that poverty increased by an estimated 4.5 percentage points in the fiscal year 2023, with 10 million people just above the poverty line at risk of falling into poverty in the face of shocks, both internal and external. The poverty headcount rate is projected at 40.1 per cent for the current fiscal year 2024 compared to 39.9 per cent in 2023. The poverty headcount rate, measured at the lower-middle-income country poverty line of $3.65/day 2017 purchasing power parity (PPP), is expected to remain around 40 per cent over fiscal year 2024-26.

The World Bank has described the deteriorating human development situation in Pakistan as a “silent, deep human capital crisis.” By contrast, Pakistan’s neighbours are performing better, as the country’s inequality-adjusted human development index is also worsening. The country’s performance on the gender inequality index and multidimensional poverty are also poor. The Bank says that in the absence of an ambitious and credible economic reform plan, confidence and investment are likely to remain muted, with real GDP projected to grow at 1.8 per cent in fiscal year 2024.

It is no secret that the economy is witnessing lower than potential growth as well as high inflationary pressures due to continued import management measures. These negative developments, combined with potential reduction in public spending on social sectors, are projected to worsen human development outcomes. These effects will be especially problematic for poorer households who are already facing depleted savings and reduced incomes.

All this will not be without its impact on society as a whole. Chronic inflation in the absence of substantial growth, along with policy uncertainty, could cause social discontent and have negative impacts on the existing welfare schemes for the people. Such a situation will call for increased targeted transfers in cash and kind in order to protect the poorest from future shocks and risks.

Another piece of bad news is from the latest Human Development Report 2023-24 which paints a gloomy picture of Pakistan’s economic performance. The UNDP’s human development index measures achievement in three aspects of human development: a long and healthy life, access to education, and a reasonable standard of living. Globally, there has been recovery in the human development index to pre-COVID levels, but Pakistan remains a laggard. Pakistan performed poorly and is now standing with the world’s poorest nations. According to the report, Pakistan has become a low human development nation, falling behind some of the poorest countries in Africa. With a low human development rating of 164, Pakistan has fallen behind extremely poor countries like Haiti and Zimbabwe who are ranked higher than Pakistan. It may be added here that the countries standing between 119 to 160 are categorised as medium human development nations. Pakistan is in the bottom group with a low ranking of 164.

What is more alarming, in the given circumstances there is little hope of things getting better in the coming days. According to some well-known economic experts, the federal government is in a debt trap and does not have any resources left to spend on human development. After paying for the provincial shares under the National Finance Commission award, the remaining money is not sufficient to pay the interest cost on the debt. This will lead to a catastrophic situation. The human development index will worsen and food insecurity will increase. Further, as Pakistan has entered a new IMF programme with very tough conditions, there will be more taxes and higher utility charges which will make life more difficult for the common people.

Mismanagement of available economic resources is a big issue. Besides massive corruption and leakage, there is bad planning and inefficient use of allocated resources. Pakistan is in the midst of a severe debt crisis driven by external debt repayments. Its growing human development crisis is evident from the indicators of literacy, education, health, poverty, and other aspects of human welfare.

Experts say that there is no way out of the situation except for the government to tighten its belt, cut back on unnecessary expenditures and withdraw the open-ended subsidies allowed to the civil and military bureaucracy in the form of free petrol, free gas, free electricity and other hidden facilities. So far it is the poor people who have borne the brunt of economic reforms in the past two years. It is high time the elites made sacrifices in the larger national interest.