The World Bank has projected that Pakistan’s gross domestic product (GDP) growth rate for the fiscal year 2021-22 will remain at 3.4 percent against Islamabad’s target of 4.9 percent.
The World Bank released its report titled October 2021 Pakistan Development Update: Reviving Exports on Thursday. The report also quoted the GDP growth rate for the last fiscal year 2020-21 at 3.5 percent against the government’s growth rate of 3.9 percent, saying the country’s real GDP growth rebounded to 3.5 percent in FY2021, after contracting by 0.5 percent in FY 2019-20 with the onset of the global pandemic.
The report said that inflation eased, the fiscal deficit improved to 7.3 percent of GDP, and the current account deficit shrunk to 0.6 percent of GDP; the lowest in a decade. It said that due to strengthened domestic demand, imports have grown much higher than exports in recent months, leading to a large trade deficit. To sustain strong economic growth, Pakistan needs to increase private investment and export more.
In examining the country’s persistent trade imbalance, the report identifies key factors that are hindering exports: high effective import tariff rates, limited availability of long-term financing for firms to expand export capacity, inadequate provision of market intelligence services for exporters, and low productivity of Pakistani firms.
The report provides policy recommendations that can help improve Pakistan’s export competitiveness. The report recommended gradually reducing effective rates of protection through a long-term tariff rationalization strategy to encourage exports, besides reallocating export financing away from working capital and into capacity expansion through the Long-Term Financing Facility.
It also suggested consolidating market intelligence services by supporting new exporters and evaluating the impact of current interventions to increase their effectiveness and design and implement a long-term strategy to upgrade productivity of firms that fosters competition, innovation and maximizes export potential. Meanwhile, WB Country Director for Pakistan, Najy Benhassine while talking to media here on Thursday said that the projection gap of Pakistan’s GDP growth rate for the fiscal year 2020-21 and 2021-22 between the Bank and the Pakistan government is mainly due to uncertainties stemming out of the Covid-19 pandemic, hoping that the final growth rate would be on the higher side. “With effective micro-lockdowns, record-high remittance inflows and a supportive monetary policy, Pakistan’s economic growth rebounded in FY2021,” said Benhassine.