Growth warning

The outgoing PML-N government has often showed off its economic performance and is basing its re-election campaign in part on the steady economic growth it has delivered in the last four years. But now the World Bank has come with a word of warning. At a conference in Islamabad on Monday, World Bank Country Director Patchamuthu Illangovan warned that Pakistan’s growth is not sustainable unless the country doubles its ratio of investment to GDP and triple spending on health and education. As desirable as both targets are, there is reason to doubt this will be achieved anytime soon. After the passage of the 18th Amendment, both health and education have been devolved to the provinces and most of the spending in these areas now takes place at the provincial level. Even if the centre were to significantly increase its own investment into health and education, it would require the buy-in of all four provinces to reach the target set by the World Bank. As an illustration of how difficult this would be, just consider how many years it took the provinces to reach a consensus on a National Health Policy. Our aim should be for universal healthcare but that would require all provinces to prioritise healthcare and reach an understanding for standardised policies.

Attracting outside investment has also proven difficult for Pakistan – outside of the China-Pakistan Economic Corridor. Even for all our successes in the war against militancy, there is still an impression of the country as unsafe. This situation hasn’t been helped by the Financial Action Task Force’s decision to place Pakistan on the grey list, with the possibility of being blacklisted still open. Foreign investors are going to be wary of placing their money in a country that is cut off from international banking channels. If there is a silver lining for the country’s economy, it is that the percentage of imports it spends on capital goods has increased. This means, in theory at least, that these imports will be used to develop our own economy, infrastructure and export base. The other ticking time bomb pointed out by the World Bank country director is Pakistan’s rate of population growth, which currently stands at 2.3 percent. A failure to get our population growth under control would cancel out any gains in GDP. There have certainly been improvements in the country’s economy in the last four years but for those gains to be made permanent there is still a lot of work left to be done.