With Pakistan’s per capita income of $1,677, this trajectory points more to economic containment than recovery.
| Photo Credit: AFP

Labourers cover themselves with shawls to protect themselves from the cold during the early morning, as they wait for work at the market in Karachi, Pakistan December 26, 2024. REUTERS/Akhtar Soomro
| Photo Credit: Reuters

The World Bank is set to approve a $20 billion indicative lending package for Pakistan – a pioneering 10-year initiative to protect its funded projects from political transitions and focus on six targeted areas, according to a media report.

The programme, titled “Pakistan Country Partnership Framework 2025-35”, aims to improve social indicators in the most neglected but important areas, The Express Tribune newspaper reported, citing official documents.

It will focus on reducing child stunting, combating learning poverty, enhancing climate resilience, decarbonising the environment, expanding fiscal space, and boosting private investment to improve productivity.

These areas have broad support across the political spectrum and are expected to remain unaffected by government changes during the 2025-2035 period, which is anticipated to include at least three general elections.

This ‘Country Partnership Framework’ is scheduled to be approved by the World Bank board on January 14, following which the global lender’s Vice President for South Asia Martin Raiser is also expected to visit Islamabad.

According to the World Bank’s assessment, the planning framework “will help shield the programme from the country’s volatile polity and frequent swings in priorities and requests that follow government changes.” The requests arising from government changes have caused ‘fragmentation of the World Bank portfolio and diluted impacts,’ it said.

A key Pakistani official, who was part of the framework development, said that the World Bank picked Pakistan as the first country where it would introduce the 10-year partnership strategy.

“The World Bank’s total indicative lending envelope for fiscal year 2025 to 2035 will total around USD 20 billion,” reads a draft of the framework.

Out of the $20 billion, the World Bank’s concessional arm, the International Development Association (IDA), will lend $14 billion and the remaining USD 6 billion is projected to be provided through the relatively expensive window – the International Bank for Reconstruction and Development (IBRD).

“However, these indicative loans will depend upon the evolution of the IDA funding over the years, Pakistan’s standing and performance, including with respect to the Sustainable Development Finance Policy and its debt vulnerability indicators,” reads the document.

In addition to the USD 20 billion loans to the government of Pakistan, the new framework also aims to support another USD 20 billion private lending by the World Bank’s two other arms – the International Finance Corporation (IFC) and the Multilateral Investment Guarantee Agency (MIGA). This brings the total package to USD 40 billion but the official loans will be equal to USD 20 billion, according to the newspaper.

The new lending will focus on six areas that “currently enjoy strong support across the Pakistani political spectrum”, according to the documents. However, it will phase out lending from 10 less-impactful sectors, such as transport, power transmission, telecoms, tertiary healthcare and higher education.

The World Bank’s concessional and expensive lending will be meant for “larger projects on average, more frequent scale-ups and expansions, and less pilots and one-off operations”, according to the planning document.

The Washington-based Bank’s new strategy marks a shift from “short-term macro-fiscal adjustment programmes and often small investments scattered in a wide array of sectors, to more selective, stable and larger investments in areas that are critical for sustained development and growth”.

The documents stated that the World Bank would still be supporting reforms to spur growth and investment and build more fiscal space.

The implementation of the 10-year framework will be supported by two-year rolling business plans that both sides will agree upon, according to the paper.

Pakistan’s Prime Minister Shehbaz Sharif. File
| Photo Credit: Reuters

Cash-strapped Pakistan will privatise all state-owned enterprises, including the loss-making Pakistan International Airlines, Prime Minister Shehbaz Sharif announced on May 14, broadening the government’s initial plans to make only loss-making state firms private.

The announcement to privatise state-run enterprises barring strategic ones comes a day after Pakistan started negotiations with the International Monetary Fund (IMF) for a new long-term Extended Fund Facility (EFF).

Mr. Sharif announced this while chairing a review meeting on the privatisation process of loss-making state-owned enterprises (SOEs), according to media reports.

During the meeting, he said that apart from strategic state-owned firms, all other enterprises — profitable or loss-making — will be privatised, Geo News reported.

Asserting that the government’s job is not to do business but to ensure a business and investment-friendly environment, Mr. Sharif directed all ministries to take action and cooperate with the Privatisation Commission.

Underscoring the need for the privatisation process to be transparent, he ordered the privatisation process of Pakistan International Airlines (PIA) to be televised, including the bidding and other important steps. The PIA’s privatisation is in its final stage, the report said.

Pakistan’s ailing national flag carrier stood as the country’s third-highest public sector loss-making entity, requiring Pakistani Rs. 11.5 billion per month solely for servicing its debts.

The process of privatisation of other institutions will also be broadcast live, the report said.

A roadmap of the Privatisation Programme 2024-2029 was also presented during the meeting, The Express Tribune newspaper reported.

Ministers were informed that loss-making SOEs were to be privatised on a priority basis and that a pre-qualified panel of experts was being appointed in the Privatisation Commission to speed up the sell-off process, the report said.

Prime Minister Sharif-led government has pushed for the privatisation of several state-owned enterprises to tackle the burden on the exchequer and the prevailing financial crunch.

Previously, debt-struck Pakistan had plans to privatise only loss-making state-owned enterprises, the Dawn newspaper reported.

On May 12, Finance Minister Muhammad Aurangzeb said that privatisation is necessary to achieve economic stability in the country.

“You have to move towards privatisation if you want economic stability in the country,” Mr. Aurangzeb said while speaking at the Pre-Budget Conference 2024-25 here.

Last week, Deputy Prime Minister Ishaq Dar said the government would limit its business only to strategic and essential SOEs under its domain and their number would be reduced from 40 after scrutiny.

Privatisation has long been on the Washington-based IMF’s list of recommendations for Pakistan, which is struggling with a high fiscal shortfall, the report said.

Pakistan narrowly averted default last summer, and the economy has stabilised after the completion of the last IMF programme, with inflation coming down to around 17% in April from a record high of 38% last May.

The country is still dealing with a high fiscal shortfall, and while the external account deficit has been controlled through import control mechanisms, it has come at the expense of stagnating growth, which is expected to be around 2% this year compared to negative growth last year.

Pakistan’s Prime Minister Shehbaz Sharif speaks at the World Economic Forum (WEF) in Riyadh, Saudi Arabia, April 28, 2024.
| Photo Credit: Reuters

Pakistan Prime Minister Shehbaz Sharif has met IMF chief Kristalina Georgieva and discussed a new loan programme for the cash-strapped country to put the economy back on track.

In a meeting on the sidelines of the World Economic Forum (WEF) Special Meeting in Riyadh, the premier thanked Ms. Georgieva, the International Monetary Fund (IMF) Managing Director, for her support to Pakistan in securing the USD 3 billion standby arrangement (SBA) from IMF last year that was now nearing its completion.

Pakistan secured the USD 3 billion IMF programme in June last year, which helped it avert a sovereign default.

Pakistan is seeking a new long-term Extended Fund Facility (EFF) after the current SBA expires this month.

“Both sides also discussed Pakistan entering into another IMF program to ensure that the gains made in the past year were consolidated and its economic growth trajectory remained positive,” according to a statement issued by the Pakistan PM’s office on Sunday.

Mr. Sharif reiterated his government’s commitment to put Pakistan’s economy back on track.

Finance Minister Muhammad Aurangzeb has said Islamabad could secure a staff-level agreement on the new programme by early July.

Islamabad says it is seeking a loan over at least three years to help achieve macroeconomic stability and execute long-overdue and painful structural reforms, though Aurangzeb has declined to detail what size of the programme the country seeks.

If secured, it would be Pakistan’s 24th IMF bailout.

The USD 350 billion economy faces a chronic balance of payments crisis, with nearly USD 24 billion to repay in debt and interest over the next fiscal year — three times more than its central bank’s foreign currency reserves, according to Geo News.

According to the state-run PTV News post on X, this was the first meeting between the prime minister and Georgieva since his re-election last month. They last met in Paris in June 2023 on the margins of the Summit for New Global Financial Pact.

The IMF Executive Board is expected to meet on April 29 to decide on the final tranche of USD 1.1 billion under SBA, the post said.

Ms. Georgieva appreciated the leadership of Mr. Sharif for timely securing SBA last year, according to the statement.

During the meeting, the prime minister said that he had directed his financial team to carry out structural reforms, ensure strict fiscal discipline and pursue prudent policies that would ensure macro-economic stability and sustained economic growth.

The IMF MD shared her institution’s perspective on the ongoing programme with the premier, including the review process.

Separately, Prime Minister Sharif highlighted the “global inequity” in healthcare while speaking at a panel discussion on ‘Redefining Global Health Agenda’ during the special meeting of WEF.

“Today, I think the first and foremost problem is global inequity,” he said, adding that the Covid-19 pandemic had “exposed” these imbalances and gaps. “Imagine the global North and the global South; distribution of vaccines and so on and so forth,” he said.

He further said that climate change had “completely changed the landscape. Pakistan does not contribute (to) even a fraction of emissions. Yet we are on the red list of climate change and in 2022, we experienced the worst floods in Pakistan (…)and we had to invest hundreds and billions of rupees to rehabilitate people.”

This is the prime minister’s second trip to Saudi Arabia in less than a month. He last went on a three-day visit to the kingdom, which was his first foreign visit since he was re-elected as premier.

Separately, Mr. Sharif held a meeting on Sunday with Islamic Development Bank (IDB) President Muhammad Sulaiman Al Jasser, where they both agreed upon the earliest completion of various ongoing projects of the IDB in Pakistan.

During the meeting, held on the sidelines of the WEF, the premier thanked the IDB for investing USD 1 billion in various projects during the previous PML-N-led tenure, a statement on PML-N’s X account said.

Pakistan Finance Minister Muhammad Aurangzeb. File
| Photo Credit: Reuters

Pakistan has formally sought a bailout package in the range of $6-$8 billion with the possibility of augmentation through climate financing from the IMF, a media report said on April 20.

Cash-strapped Pakistan also requested to dispatch the International Monetary Fund (IMF) review mission next month to firm up details of the next bailout package for three years under the Extended Fund Facility (EFF). However, the exact size and timeframe of the new package will only be determined after evolving consensus on the major contours of the next programme in May 2024, Geo News reported from Washington.

A high-level Pakistani delegation led by Finance Minister Muhammad Aurangzeb is currently visiting Washington to attend the annual spring meetings of the IMF/World Bank.

Although Pakistani authorities are pitching a rosy picture of the economy, the IMF in its latest Regional Economic Outlook (REO) released by Middle East and Central Asia (ME and CA) said the cash-strapped country’s external buffers deteriorated, mostly reflecting ongoing debt service, including Eurobond repayments.

“Where inflationary pressures persist, monetary policy should remain tight and follow a data-dependent approach (Egypt, Kazakhstan, Pakistan, Tunisia, Uzbekistan), while closely monitoring risks of a reversal of inflation developments,” it added.

After contracting in 2023, growth in Pakistan is projected to rebound to 2% in 2024, supported by continuing positive base effects in the agriculture and textile sectors.

Meanwhile, Finance Minister Aurangzeb told the World Bank in Washington that with the reform agenda fully implemented in key areas, Pakistan’s economy has the potential to grow to $3 trillion by 2047.

Implementing structural reforms

Pakistan’s current $3 billion arrangement with the IMF runs out in late April and the government is seeking a longer and bigger loan to help bring permanence to macroeconomic stability and an umbrella under which the country can execute structural reforms.

The IMF however emphasised that prioritising reforms to revitalise the Pakistani economy outweighs the size of the new loan package being negotiated.

Economic activity is subdued in Pakistan, the World Bank noted. Representational
| Photo Credit: Reuters

The World Bank has painted a grim economic picture of Pakistan in its biannual report, cautioning that over 10 million more people are at risk of descending into poverty in the cash-strapped country. The Washington-based lender’s apprehension comes from a sluggish economic growth rate of 1.8% coupled with soaring inflation, a staggering 26% in the current fiscal year.

The World Bank’s biannual Pakistan Development Outlook report indicated that the country is set to miss almost all major macroeconomic targets. The international lender said the country is anticipated to fall short of its primary budget target, remaining in deficit for three consecutive years, contrary to the International Monetary Fund’s stipulations mandating a surplus.

Sayed Murtaza Muzaffari, lead author of the report, said despite a board-based yet nascent economic recovery, poverty alleviation efforts remain insufficient. The economic growth is projected to stagnate at a paltry 1.8% while maintaining the poverty rate at around 40%, with approximately 98 million Pakistanis already grappling with poverty, the World Bank report said.

Pakistan’s cost-of-living crisis

The report underlined the vulnerability of those hovering just above the poverty line, with 10 million individuals at risk of slipping into poverty. The report said that the poor and vulnerable are likely to have benefited from the windfall gain in agricultural output but these gains were offset by continued high inflation and limited wage growth in other sectors that employ many of the poor, such as construction, trade, and transportation.

The wages of daily labourers increased only 5% in nominal terms during the first quarter of this fiscal year when the inflation was above 30%, it said.

The persisting cost-of-living crisis coupled with rising transportation costs could potentially lead to an increase in out-of-school children and delayed medical treatments, particularly for worse-off families, warned the World Bank.

At the same time, it added that food security remains a concern in parts of the country.

Among 43 rural districts across Khyber Pakhtunkhwa, Sindh, and Balochistan, many of which were impacted by the 2022 floods, the prevalence of acute food insecurity is also projected to increase from 29% to 32% in the third quarter of this fiscal year, the report said.

Weak fundamentals

“Despite some recovery, Pakistan’s economy remains under stress with low foreign reserves and high inflation. Policy uncertainty remains elevated and economic activity is subdued, reflecting tight fiscal and monetary policy and import controls,” the World Bank said.

The Washington-based lender said growth is projected to remain below potential with heightened social vulnerability and limited poverty reduction in the medium term. “Financial sector risks, policy uncertainty, and stronger external headwinds pose significant risks to the outlook,” it added.

Pakistan’s current account deficit (CAD) narrowed to $0.8 billion in the first half of the current fiscal year from $3.6 billion in the first half of the last fiscal year, on import controls, reduced domestic demand, and lower global commodity prices, the report said.

Meanwhile, official remittances fell by 6.8% year-on-year in the first half of the current fiscal year due to exchange rate rigidities earlier in the year. “Inflation is projected to remain elevated at 26% in FY24 due to higher domestic energy prices, with little respite for poor and vulnerable households with depleted savings and lower real incomes,” it said.

The World Bank said the fiscal deficit is projected to widen to 8% of the GDP due to higher interest payments but gradually decline as fiscal consolidation takes hold and interest payments fall over time.

Pakistan’s economy is expected to grow by only 1.8% in the current fiscal year ending June 2024 whereas the official target is 3.5 per cent, the World Bank said. For the next fiscal year too, the World Bank has projected only a 2.3% economic growth rate, which is even lower than the population growth rate of 2.6%.

Muhammad Ishaq Dar has said that the Pakistani business community wants the government to resume trade with India. File
| Photo Credit: PTI

Pakistan will “seriously” consider restoring trade ties with India that remained suspended since August 2019, Foreign Minister Muhammad Ishaq Dar has said, indicating a potential shift in diplomatic stance towards the neighbouring nation.

Mr. Dar made these remarks during a press conference in London following his participation in the Nuclear Energy Summit in Brussels, Geo News reported. He highlighted the eagerness of cash-strapped Pakistan’s business community to resume trade activities with India. “Pakistani businessmen want trade with India to resume,” he said on March 23. Pakistan will consider restoring trade ties with India, he noted.

“We will seriously look into matters of trade with India,” Mr. Dar was quoted as saying by the Express Tribune newspaper.

His remarks indicated a potential shift in diplomatic stance towards India.

Pakistan downgraded ties with India

Pakistan downgraded its diplomatic ties with New Delhi after the Indian government abrogated Article 370, revoking the special status of Jammu and Kashmir and bifurcating the State into two Union Territories.

The decision, Islamabad said, undermined the environment for holding talks between the neighbours.

Pakistan has been insisting that the onus of improving the ties was on India and urging it to undo its “unilateral” steps in Kashmir as a sort of pre-condition to start the talks.

India has dismissed the suggestion and made it clear to Pakistan that the entire Union Territories of Jammu and Kashmir and Ladakh were integral and inalienable parts of the country.

New Delhi has also asserted that the constitutional measures taken by the Indian government to ensure socio-economic development and good governance in the Union Territory of Jammu and Kashmir are matters internal to India.

It has been maintaining that it desires normal neighbourly relations with Pakistan while insisting that the onus is on Islamabad to create an environment that is free of terror and hostility for such an engagement.

Despite the frosty ties, the two countries agreed to renew the 2003 ceasefire agreement along the Line of Control (LoC) in February 2021.

Lately, Prime Minister Narendra Modi congratulated Shehbaz Sharif on becoming the head of Pakistan’s government in a post on X, prompting hopes for a diplomatic thaw. Mr. Sharif responded days later with an equally curt post, thanking Mr. Modi for his “felicitations”.

The Sharif-led coalition government, which came to power after the February 8 elections, is focusing on reviving the country’s dwindling economy.

Chief Justice of Pakistan Qazi Faez Isa, right, administers the oath of office to newly elected President Asif Ali Zardari during a ceremony at the Presidential Palace, in Islamabad, Pakistan on March 10, 2024.
| Photo Credit: AP

Pakistan’s newly-elected President Asif Ali Zardari on March 13 announced that he would not draw any salary during his tenure as part of his bid to help the cash-strapped country face the challenging economic hardship.

Mr. Zardari, 68, who took oath as Pakistan’s 14th President on Sunday, decided to encourage prudent financial management and not burden the national exchequer, his Pakistan Peoples Party (PPP) said in a statement on X.

“The President considered it essential not to burden the national exchequer and preferred to forgo his salary,” President Secretariat Press Wing said in a press release on Tuesday.

Also Read | New Pakistan PM Shehbaz Sharif orders ‘immediate’ talks with IMF for extended facility for ailing economy

Former president Arif Alvi was drawing Rs 8,46,550 per month, which was fixed by Parliament in 2018. Mr. Zardari is one of the richest politicians in Pakistan.

Mr. Zardari, co-chairman of the PPP, took oath as President of Pakistan for a second term at a ceremony at Aiwan-i-Sadr in Islamabad on Sunday.

Separately, Interior Minister Mohsin Naqvi, following the steps of Mr. Zardari, also decided to forego his salary while in office citing the economic challenges faced by the country.

Taking to X, Mr. Naqvi said that he committed to serving the nation in challenging times “in every possible way”.

Mr. Naqvi said that he has decided to forego his salary during the tenure. “In these challenging times, committed to supporting and serving our nation in every possible way,” he said in an X post.

Debt-struck Pakistan has been reeling under economic pressure with the price of commodities touching sky-high prices.

The newly elected government needs a new loan from the International Monetary Fund on an urgent basis, and its politicians, who are often super-rich, use such tactics to win support from the impoverished masses.

In February last year, the Cabinet of then-prime minister Shehbaz Sharif gave up their salary and other perks to help the country tackle its possible default on external liabilities.

Addressing the maiden cabinet meeting after inducting 19 members on Monday, Prime Minister Sharif said that the first test of the cash-strapped country’s newly-elected government is to rein in inflation and prices of food items.

Mr. Sharif, who was elected for a second term on Sunday, said that bringing inflation under control is the biggest challenge, however, the government together with the provincial administrations would consider ways how to manage the prices of the essentials.

“This is our first test,” he said.

Mr. Sharif said Pakistan is facing massive challenges and a “deep surgery” is required to pull the cash-strapped country out of the economic crisis.

Taking stock of the issues and problems affecting the economy and the country, the Prime Minister asked his Cabinet members to “perform or perish”, saying that the time is “now or never”.

Mr. Sharif said the government should make difficult decisions without wasting any time. “Deep surgery is needed as antibiotics will not work,” he said.

Also Read | Ensure Pakistan does not divert loans to foot defence bills: India to IMF

He directed the immediate formation of a committee to control the prices of essential food items.

He emphasised that strict action would be taken against unjustified price increases and profiteering in essential commodities.

In response to a recommendation by the Ministry of Commerce, the Cabinet also approved a restriction on the export of onions and bananas until the 15th of next month.

Pakistani traders went on strike against the soaring cost of living, including higher fuel and utility bills and record depreciation of the rupee against the dollar, which has led to widespread discontent among the public. File
| Photo Credit: AP

Pakistan’s inflation rate rose to 31.4% year-on-year in September from 27.4% in August, statistics bureau data showed on Monday, as the nation reels from high fuel and energy prices.

The country is embarking on a tricky path to economic recovery under a caretaker government after a $3 billion loan programme approved by the International Monetary Fund in July averted a sovereign debt default, but with conditions that complicated efforts to rein in inflation.

On a month-on-month basis, inflation climbed 2% in September, compared to an increase of 1.7% in August

Reforms required by the IMF bailout, including an easing of import restrictions and a demand that subsidies be removed, have already fuelled annual inflation, which rose to a record 38.0% in May.

Interest rates have also risen to their highest at 22%, and the rupee hit all-time lows in August before recovering in September to become the best performing currency following a clampdown by authorities on unregulated FX trade.

On Friday, the Ministry of Finance said in its monthly report that it anticipated inflation remaining high in the coming month, hovering around 29-31% due to an upward adjustment in energy tariffs and a major increase in fuel prices.

The report added that inflation was, however, expected to ease, especially from the second half of the current fiscal year that starts on January 1.

On Saturday Pakistan cut petrol and diesel prices from a record high, after two consecutive hikes. The Finance Ministry cited international prices of petroleum products and the improvement in the exchange rate, following the clampdown on unregulated FX trade.

Inflation has been elevated, hovering in double digits, since November 2021. The South Asian country targeted inflation at 21% for the current fiscal year, but it averaged 29% during the first quarter.

Worsening economic conditions, along with rising political tensions in the run-up to a national election scheduled for November, triggered sporadic protests in September, with many Pakistanis saying they are struggling to make ends meet.

Analysts said the inflation reading was in line with market expectations.

Tahir Abbas, head of research at Arif Habib Limited, a Karachi-based investment company, said inflation appeared to have peaked for the current fiscal year and would subsequently recede.

“The higher reading is mainly due to the low base effect which was also mentioned in the last monetary policy statement. Going forward, in the next few months, we expect inflation to ease to around 26-27%,” said Fahad Rauf, head of research at Ismail Iqbal Securities, a Karachi-based brokerage firm.

Mr. Rauf said higher inflation statistics should not impact monetary policy.

Islamabad:

Pakistan’s 40 per cent of the population lives below the poverty line, as per the World Bank, Dawn reported.

Dawn is a Pakistani English-language newspaper.

The country now needs to take a look at its policy decisions driven by strong vested interests of military, political and business leaders, as per the World Bank.

The warning by the financial institution comes ahead of the new election cycle so that the upcoming government can make early choices.

The World Bank has asked Pakistan to tax its agriculture and real estate to achieve economic stability through steep fiscal adjustment of over seven per cent of the size of the economy, as per Pakistan-based The Express Tribune newspaper.

The lender on Friday also revealed that poverty in Pakistan shot up to 39.4 per cent as of last fiscal year with 12.5 million more people falling into the trap due to poor economic conditions. About 95 million Pakistanis now live in poverty.

The Washington-based lender unveiled the draft policy notes that it prepared with the help of all stakeholders for the next government.

The lender identified low human development, unsustainable fiscal situation, over-regulated private sector, agriculture and energy sectors as the priority areas for reforms for the next government.

The World Bank proposed measures that immediately increase the tax-to-GDP ratio by five per cent and cut expenditures by about 2.7 per cent of GDP, aimed at putting the unsustainable economy back on a prudent fiscal path, according to the Express Tribune.

Meanwhile, the WB’s lead country economist Tobias Haque said the bank is deeply concerned about the economic situation of today.

Pakistan is facing serious economic and human development crises and it is at a point where major policy shifts are required, he added.

The bank’s note on strengthening government revenues showed a host of measures to improve the revenue-to-GDP ratio by five per cent through the withdrawal of tax exemptions and increasing the burden of taxes on the real estate and the agriculture sectors, as per The Express Tribune.

(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)