Economic Model
The World Bank Country Director, Najy Benhassine, notes that Pakistan’s existing economic model is ineffective as it lags behind comparable nations. The substantial advancements in poverty reduction are now showing signs of reversal, and the advantages of economic growth are primarily benefiting a select elite group.
In a recent Policy Vision article featured in the latest UNDP publication, the Country Director of the World Bank in Pakistan, Mr. Benhassine, emphasized the urgent need for policy changes to address longstanding issues hindering development. He highlighted the detrimental effects of existing policies on development, which have disproportionately favored a few, resulting in volatile and low growth.
Pakistan, facing significant exposure to climate change, has experienced the destructive impacts of climate shocks and natural disasters. Mr. Benhassine stressed the necessity of addressing policy failures and distortions, particularly in the agri-food and energy sectors. In agriculture, he called for reforms to dismantle subsidies and price restrictions, unlocking smallholder farmers from low-value farming systems and discouraging environmentally damaging practices.
For the energy sector, the World Bank official advocated for reforms to enhance financial sustainability, improve the efficiency of distribution companies, and reduce the high costs of electricity generation through increased renewable energy production. While acknowledging the well-established need for these policy shifts, he noted the expected challenges and opposition to reform efforts.
Mr. Benhassine underscored the imperative for fiscal management improvement, citing unsustainable debt servicing costs and insufficient resources for human development, infrastructure investment, economic challenges, and climate adaptation. He recommended consolidating and enhancing the quality of government spending by cutting regressive subsidies, reducing losses from inefficient state-owned enterprises, and raising more revenue from the better-off through progressive taxation.
To achieve improved living standards and foster a dynamic and open economy, the World Bank official called for reducing protectionism in inward-oriented sectors, addressing distortions in taxation favoring non-tradables, and improving the overall business environment, especially for smaller firms. He stressed the importance of addressing structural macroeconomic imbalances, particularly on the fiscal side, to ensure a stable economic environment for attracting investors.
Yong Ye, the Country Director of the Asian Development Bank in Pakistan, echoed these sentiments, emphasizing the necessity of consistent country policies and an uninterrupted reform momentum to create a conducive environment for addressing complex economic challenges and achieving effective outcomes from development assistance. The ADB remains committed to supporting Pakistan’s development goals under its Strategy 2030, aiming to promote prosperity, inclusiveness, resilience, and sustainability.
