The World Bank has released a report on Friday, titled “From Swimming in Sand to High and Sustainable Growth,” which highlights the impact of Pakistan’s inability to allocate its resources and talent to the most productive uses on its economic growth. The report argues that the country’s economy can grow sustainably only if it introduces reforms that improve productivity and allocate resources and talent to more dynamic activities.
The report lays out a roadmap for reducing the distortions in the economy that are hindering productivity growth. It highlights the need for reforms such as harmonising direct taxes across sectors, reducing the anti-export bias of trade policy, and reducing regulatory complexity, among others.
Gonzalo J. Varela, Senior Economist and co-author of the report, stated that Pakistan’s economy is at a crucial stage and that it is imperative to address the long-term structural imbalances that have hindered sustainable growth. He further emphasised that the report recommends a series of policy changes that can be implemented in a phased manner to achieve this goal.
The report also highlights the need to maximise the positive impact of businesses and productivity across the board by reducing regulatory complexity, harmonising the general sales tax, reforming investment laws to attract foreign direct investment, and upgrading insolvency laws.
In addition, the report focuses on three key areas that are central to the growth process: productivity, growth of firms and investment, and female labour force participation. The report presents new evidence on firms’ productivity dynamics across different sectors, patterns of firms’ growth and investment, and allocation of female talent.
Pakistan is facing challenges in utilising its full talent potential, particularly with regards to women. Despite progress in education, constraints prevent women from participating in the labour force, resulting in a lower female labour force participation rate compared to other countries at similar levels of development. The report estimates that closing the female employment gap could increase the country’s GDP by as much as 5.4 percentage points. The report recommends that the government should remove the legal and regulatory constraints that are hindering female labour force participation, and implement measures to support women’s empowerment and inclusion in the labour market.
Overall, the World Bank report provides a comprehensive analysis of the challenges facing Pakistan’s economy and lays out a roadmap for achieving sustainable and inclusive growth. The recommendations made in the report can help the country to address the structural imbalances that are hindering its economic growth and to unleash its full potential. However, implementing these recommendations will require political will, coordination among stakeholders, and sustained efforts over time.