Pakistan’s poverty rate increased 5.2 percent in one year: World Bank report

The World Bank (WB) has released its Pakistan Development Update Report for the year 2023, shedding light on the country’s economic situation. The report paints a challenging picture, highlighting a sharp slowdown in Pakistan’s economy during the fiscal year 2023.

The report predicts that Pakistan’s GDP growth for the current fiscal year will be limited to a mere 1.7 percent. Furthermore, inflation is expected to remain persistently high, hovering around 26.5 percent throughout the fiscal year.

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The report said that Pakistan’s strong post-pandemic recovery came to a halt in FY23 with the
delayed withdrawal of COVID-19-era policy stimulus leaving large accumulated economic imbalances.

In response to these concerning economic indicators, the World Bank has emphasized the need for Pakistan to address several key areas of concern. Foremost among these recommendations is a call to reduce tax exemptions and bolster revenue generation.

The World Bank’s proposed reforms extend to tax collection, with a focus on the retail, agriculture, and property sectors. Additionally, the institution has suggested increasing the federal excise duty on cigarettes and lowering import duty exemptions on various items.

Income tax reforms are also on the agenda, as the World Bank advocates for a reduction in subsidies and the restriction of zero rating in the energy sector. The involvement of the private sector is deemed critical for the improvement of various government institutions.

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In an effort to streamline the country’s tax system, the World Bank recommends abolishing concessional tax rates and limiting zero-rate tax benefits in various sectors.

One of the most alarming revelations in the report pertains to poverty rates. Pakistan has witnessed a troubling increase in poverty due to unfavorable economic conditions. The poverty rate surged from 34.2 percent to a staggering 39.4 percent in just one year, with an additional 1.25 million people falling below the poverty line during this period.

The World Bank attributes this rise in poverty to factors such as inflation, an increasing financial deficit, and a significant depreciation of the rupee against the US dollar.

To address these economic challenges, the World Bank underlines the importance of cost control and sustainable economic reforms, particularly in the energy sector.

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The report also highlights Pakistan’s disproportionately low development expenditure compared to its high non-development expenditure. In light of this, the World Bank calls for a stronger role for the Council of Common Interests to ensure effective fiscal management and policy coordination.

As Pakistan navigates its economic challenges, the recommendations put forth by the World Bank underscore the urgency of implementing substantial reforms to stabilize the country’s financial landscape and improve the living conditions of its citizens.