World Bank warns Pakistan on persistent structural weaknesses in economy
The World Bank has called for
wide-ranging reforms to Pakistan’s tax and subsidy frameworks, warning that
persistent structural weaknesses in revenue collection, water management, and
energy pricing are holding back sustainable economic growth across South Asia.
In its latest regional development report, the
Bank stressed the need to strengthen Pakistan’s tax system by broadening the
tax base and improving compliance. It noted that reliance on a narrow pool of
taxpayers continues to constrain fiscal space, while well-designed
environmental taxes could both raise revenue and advance climate objectives by
discouraging pollution.
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The report highlighted acute water stress across
South Asia, ranking Pakistan among the most water-scarce countries globally.
Declining groundwater levels, aging irrigation infrastructure, and inefficient
agricultural practices are contributing to significant water losses. However,
the Bank cited encouraging results from targeted interventions, pointing to
modern irrigation projects in Punjab that have reduced water consumption by 57
per cent. The adoption of improved farming techniques has also increased crop
yields by an estimated 14 to 31 per cent, underscoring the benefits of scaling
such initiatives nationwide.
On energy pricing, the World Bank noted that
Pakistan has begun linking electricity and gas subsidies to the Benazir Income
Support Programme (BISP) to better target vulnerable households. The report
said continued subsidy reforms could help reduce resource misallocation, limit
financial losses in the energy sector, and ease pressures from circular debt.
It recommended shifting untargeted fuel subsidies toward social protection
programmes to ensure fiscal savings translate into broader welfare gains.
The Bank also highlighted rising climate risks
for small businesses, particularly from flooding. It noted that a climate risk
facility is being developed to support enterprises affected by climate-related
disasters, helping them recover and sustain livelihoods.
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According to the report, BISP has been
strengthened through digital systems that enhance transparency and service
delivery. During the COVID-19 pandemic, the programme provided emergency assistance
to nearly 12 million families. The Bank added that self-registration mechanisms
for social assistance have now been introduced in Pakistan and the Maldives,
expanding access and reducing administrative hurdles.
Source:
MinuteMirror