ADB projects Pakistan to achieve 4.2 percent GDP growth in 2015

KARACHI: The Asian Development Bank (ADB) has projected a steady uptick in Pakistan’s economic growth to 4.2 percent and 4.5 percent in 2015 and 2016, respectively, on the strength of improved macroeconomic indicators and the government’s commitment to continue implementing effective policies to support growth.
“Pakistan posted a GDP growth of 4.1 percent last year and as per the Asian Development Outlook, the GDP growth would rise to 4.2 percent for 2015 and 4.5 percent in 2016,” Wencai Zhang, ADB Vice President told a group of journalists on Friday. “If this momentum is maintained, the country will be able to achieve around seven percent growth in 10 years.”
Zhang, who was in Pakistan on a three-day visit to gather feedback on the ADB’s operations in the country ahead of bank’s new Country Partnership Strategy, praised the government for stablising the economy.
“The government is committed to continue implementing effective macroeconomic policies in order to help boost growth…. we feel structural reforms to increase potential growth should continue to remain a high priority for a sustainable growth,” the ADB official said.
Zhang, however, said the country still faces a lot of challenges ahead.
“Pakistan is a high potential country, but there are several constraints to growth, including consolidation of macroeconomic stability, inadequate infrastructure and shortage of energy, inadequate transport and connectivity network, scarcity of skilled labour and poor health services,” Zhang of Manila-based ABD said.
Zhang underlined lack of access to finances, particularly for the SME sector and farmers and stressed upon the need to mobilise private sector investment.
Talking about the security challenges, he said, stable political and social environment was a must for the growth and development and added Pakistan needed strong capacity building for government institutions.
Zhang said the next five to 10 years were critical for the country to make reforms and catch-up with the emerging economies, as Pakistan needed to upgrade its income groups.
Zhang said the ADB focuses on six areas, including energy, transport, agriculture and irrigation, public sector management, financial sector and social sector.
The bank has committed over $5 billion in the ongoing operational funding to develop Pakistan’s energy security, transportation infrastructure, irrigation networks, urban services, social protection services and reforms, he said.
The ADB funded $400 million this year for the energy sector reforms, he said, adding, it would inject $1 billion to $1.5 billion per annum in the country’s infrastructure development. “We have earmarked over $1 billion a year for Pakistan, but this funding would depend on the readiness of the projects,” Zhang said.
Highlighting the importance of the public-private partnership (PPP) projects, he said a programme is in the pipeline for Sindh this year and for Punjab next year to promote PPP projects.
“We take note of the proposed China-Pakistan Economic Corridor, linking Karachi and the Gwadar ports to Xinjiang in the Peoples Republic of China. The ADB shares Pakistan and PRC’s leaderships’ vision for improved regional integration. The proposed economic corridor will bolster trade and commerce and economic growth in Pakistan and China and among countries in the region.”
To achieve higher growth, Pakistan will need to prioritise the implementation of structural economic reforms, including taxation and other fiscal policies and take action to alleviate the power shortages.
Low tax revenues, inefficient public sector enterprises and large subsidies have contributed to fiscal imbalances in Pakistan, which need to be addressed to encourage private investment and to sustain public investment in infrastructure, education and health, Zhang said.
With considerable natural resources and ample scope to grow its economy, Pakistan must look to improve agricultural productivity and to expand markets for the manufacturing and service sectors, he said.
“The ADB appreciates the government’s thrust on improving project management and understanding the importance of better portfolio performance to ensure timely development impacts and scaling up of the bank’s assistance in the country.”
“The Pakistan government and the ADB will need to continue to work together to improve portfolio performance further in order to achieve targeted development objectives.”
“We have very serious commitments from the government of Pakistan and we really encourage them for reforms,” the ADB official added.