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Growth Recovery: Pakistan’s GPD to accelerate to 4.5%, World Bank


According to projection of World Bank, the Gross Domestic Product (GDP) of Pakistan will touch the figure of 4.5% in the running fiscal year and will accelerate to 4.8% in FY 2016-17.


World Bank in its new report, Pakistan Development Update, has stated that GPD of the county is improving and will accelerate further because of strong services growth and some improvement in the industry sector. The report highlights the major improvement of the external sector in Pakistan over the past few years.

According to report the external factors which resulted in growth recovery are increase in foreign exchange reserves, increase in foreign remittances, and favorable balance of payments because of decrease the current account deficit ($2.6 bn in FY 2014-15 as compared to $3.1 bn of the previous one.)

“There is an improvement in Pakistan’s overall economic environment. With macroeconomic stability largely restored, Pakistan can focus now on boosting development outcomes, which are not where one would expect, given the country’s income level”, says Patchamuthu Illangovan, World Bank Country Director for Pakistan. “To improve the country’s competitiveness, it is extremely important that the next phase of reforms is implemented and that Pakistan increases both public and private investment levels, which are among the lowest in the world.”


However, there are also many factors that are decreasing the level of investment in the country. Constrained fiscal space limits the government’s ability to make the necessary complementary public investment. This is also producing negative impact over the private investment. The reason behind low investment is the low domestic saving rate that is 10% of GPD as compare to 25% in South Asia. Other factors for low investment are limited access to financial markets, high dependency ratio, and low returns on financial instruments.

“Low domestic savings do not support higher investment levels”, says Enrique Blanco, Lead Country Economist. “The Government cannot make the required and complementary public investments, partly due to low revenue levels. The Government has embarked on ambitious program to improve tax policy and simplify tax administration, with the ultimate aim of increasing tax collection. There have been some improvements over the past few years – but results so far are not as expected and renewed efforts will be needed to address Pakistan’s very low revenue levels.”

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