According to the World Bank, Pakistan’s present economic policies are faulty and misdirected as they have failed to deliver for the masses who remain mired in a whirlpool of poverty and backwardness.

The WB Country Director in an article published by UNDP has said that Pakistan’s current economic model is not working since it has fallen behind its peers, past progress in poverty reduction has now started to reverse, and the benefits of growth have accrued to a narrow elite. To quote him,“There is a broad consensus that action is needed to change policies that have plagued development, benefitted only a few, and led to very volatile and low growth.”

The WB official has pointed out that Pakistan is heavily exposed to climate change, with the potentially devastating impacts of climate shocks and natural disasters already apparent. He has emphasised that policy failures and distortions in the critical agri-food and energy sector must be addressed. In agriculture, reforms undertaken to unwind the subsidies and price restrictions lock smallholder farmers into a low-value farming system and encourage resource-intensive and environmentally damaging production practices.

Among the many reforms needed to correct the situation, an important one is in the energy sector in order to speed up progress towards financial sustainability, improve the efficiency of distribution companies, including through increased private participation, and address the very high costs of electricity generation through increased renewable generation. The need for such policy shifts has been well established, but experience shows that any reform efforts face opposition from the entrenched interests.

There is a consensus of opinion among experts, both national and international,  that urgent steps are required to improve fiscal management, reduce debt servicing costs and ensure sustainable domestic revenue mobilisation. The objective should be to raise adequate resources to invest in human development and infrastructure, address economic challenges, and adapt to the devastating effects of changing climate.

For the moribund Pakistan’s economy, a troublesome area is ballooning government spending, involving a lot of avoidable waste and rampant corruption. As repeatedly pointed out by experts, there is a pressing need to cut regressive and distortionary subsidies, and reduce losses from inefficient state-owned enterprises, including in the energy sector. Also, the taxation system should be revised to raise more revenue from the better-off classes both in the urban and rural areas.This calls for progressive taxation of property and environmentally-damaging activities, as well as reducing tax exemptions for the pampered landed aristocracy.

To attract foreign investment and improve the ease of doing business, the country should opt for a more open economy, discourage inward looking sectors and foster export oriented industries. Special measures need to be taken to facilitate smaller firms which face costly and time consuming red tape as well as arbitrary decision making at various government levels.

In the same vein, another piece of useful advice has come from the Country Director of Asian Development Bank in Pakistan who has opined that consistent country policies and an uninterrupted reform momentum are necessary conditions to provide a conducive environment for addressing the complex economic challenges that Pakistan faces in achieving long-term growth and effective outcomes from development assistance.In his recently published article he has observed that that ADB has been a key partner in the transformation of the country, and is committed to continuing serving in the next phase of Pakistan’s development — with a vision to promote prosperity, inclusiveness, resilience, and sustainability, under the ADB Strategy 2030.

In an earlier report, the World Bank advocated Pakistan for a sharp fiscal adjustment of about 4pc of GDP and decisive implementation of broad-based reforms committed to the International Monetary Fund (IMF) to get out of the fiscal and macroeconomic quagmire. In its recent quarterly report it said,“Predicated on the robust implementation of the IMF Standby Arrangement (SBA), new external financing and continued fiscal restraint, real GDP growth is projected to recover to 1.7pc in FY24 and 2.4pc in FY25”.

It estimated the rate of inflation at 26.5pc for the current fiscal year and 17pc for FY25. According to the report, the massive depreciation, high exchange rates and resultant heavy bank borrowing to finance record fiscal deficits and debt servicing fuelled the spiralling multi-decade high inflation rates.As a consequence, more than 12.5 million people fell below the international poverty line ($3.65 per day) from the vulnerable stage or 39.4pc of the population under the poverty line FY23 — down from 34.2pc in FY22.

All international development agencies agree on the point that without proper fiscal adjustment and implementation of broad-based reforms, Pakistan’s economy will remain vulnerable to periodic domestic and external shocks.Good and efficient economic management and deep structural reforms alone can ensure macroeconomic stability and long-term growth.