The World Bank has outlined its recommendations to help ,Pakistan aims to tackle mounting circular debt and strengthen fiscal sustainability. In its latest South Asia Development Report, the bank emphasized the need for subsidy reforms, better tax collection, and efficient management of natural resources. These measures aim to reduce financial losses, improve social protection, and encourage sustainable development in the country.
Linking Electricity and Gas Subsidies to BISP
The World Bank suggested that Pakistan link electricity and gas subsidies to the Benazir Income Support Programme (BISP). This approach is expected to reduce misallocation of resources and decrease the burden of circular debt. According to the report, savings from these subsidy reforms could be redirected toward social protection initiatives, ensuring benefits reach the most vulnerable populations.
The report emphasizes that improper subsidy allocation has contributed significantly to Pakistan’s mounting fiscal deficits. By targeting subsidies through BISP, the government can improve efficiency and ensure financial support reaches deserving households. This step could also reduce recurring fiscal losses and stabilize the energy sector.
Tax Reforms and Pollution Control
In addition to subsidy reforms, the World Bank stressed the importance of tax reforms in Pakistan. The report calls for improving the tax system, expanding the tax base, and enhancing collection mechanisms. Strengthening the tax system will generate additional government revenue and reduce reliance on borrowing.
The World Bank also recommended discouraging pollution as a means of raising revenue. By implementing environmental taxes or levies, Pakistan can promote sustainable industrial practices while generating funds to support economic growth.
Efficient Water Management for Agriculture
The report drew attention to Pakistan’s water scarcity challenges. Despite being one of the most water-stressed countries globally, the nation continues to lose significant water due to inefficient irrigation methods and outdated farming practices.
The World Bank noted that modern irrigation projects in Punjab have resulted in water savings of up to 57 percent. Efficient water management boosted crop yields in these areas by 14 to 31 percent. The report urged Pakistan to adopt similar initiatives nationwide to conserve water and enhance agricultural productivity.
The World Bank’s strategies aim to address numerous structural issues, including circular debt, subsidy inefficiencies, water mismanagement, and limited tax revenue. If implemented effectively, these reforms could strengthen Pakistan’s fiscal position, promote social protection, and support sustainable economic development.
