2017年-世界发展银行全球_Pakistan_Development_Update_May_2017___Growth_-_A_Shared_Responsibility_77页_4mb

PAKISTAN DEVELOPMENT UPDATE Summary

Core Content

This report, titled "Growth: A Shared Responsibility", is a comprehensive update on Pakistan's economic performance, outlook, and development challenges. It emphasizes the need for continued structural reforms and macroeconomic stability to sustain growth and improve human development outcomes.

Main Points

Economic Performance

• Pakistan's economy is among the top performers in South Asia, with GDP growth expected to reach 5.2% in FY17, up from 4.7% in FY16.
• Growth is driven by domestic consumption, which accounts for 92% of GDP in FY16, and increased consumer and investor confidence following the successful completion of the IMF Extended Fund Facility (EFF) program.
• Services (59% of the economy) are expected to grow at 5.6% in FY17, while agricultural production has seen some recovery.
• Investment and savings rates remain low, with total investment at 15.2% of GDP and national savings at 14.6% of GDP in FY16.

Fiscal and External Sector

• The fiscal deficit has increased for the first time in three years, reaching 2.4% of GDP in H1FY17, up from 1.8% in H1FY16.
• Federal tax revenues have weakened, and non-tax revenues have contracted significantly.
• Consolidated expenditure increased by 11% in FY17, but revenue growth fell by 0.7%.
• The current account deficit widened due to declining exports (down 1.2%) and rising imports (up 14.2%) compared to the same period in FY16.
• Remittances declined for the first time in over a decade, with a 4.5% drop from GCC countries, which account for 65% of total remittances.
• Official reserves fell from US$18.1 billion in June 2016 to US$16.5 billion by the end of March 2017, equivalent to only 3.6 months of imports.

Monetary Policy and Inflation

• Inflation remained within a tolerable range, with the State Bank of Pakistan keeping the policy rate unchanged at 5.75% for the first 10 months of FY17.
• Inflation picked up momentum, reaching 4.8% year-on-year in April 2017.
• Private sector credit increased by 8.6% in H1FY17, driven mainly by the textiles sector.
• Bank profitability is weakening in a low-interest rate environment, but remains healthy overall.

Key Challenges

Structural Reforms

• Structural reform momentum has slowed, with fiscal consolidation efforts facing setbacks and privatization stalled.
• The energy sector is particularly problematic, with circular debt resurfacing and reforms stalled.
• Collaboration between federal and provincial governments is needed for successful reform implementation.

Provincial Role

• Provincial governments, especially Punjab, have a critical role in promoting economic growth.
• Punjab's own-source tax revenue is only 25% of its potential, with a revenue potential of Rs. 432 billion and actual collection of Rs. 108 billion in FY16.
• Tax policy and administration shortcomings are key contributors to the tax gap, including jurisdictional overlaps, large tax exemptions, low compliance, and weak coordination.
• General Sales Tax on Services (GSTS) and Urban Immovable Property Tax (UIPT) have significant potential for revenue enhancement.

Youth Employment

• Skills development is crucial to addressing the youth bulge in Pakistan.
• Punjab has made progress in expanding Technical and Vocational Education and Training (TVET), with half a million individuals trained in FY16.
• There is limited evidence that this training leads to labor market-relevant skills or better employment outcomes.
• Further policy efforts are needed to ensure quality training and alignment with employer needs.
• Public employment services or wage subsidies could be tested to improve employment outcomes.

Agricultural Sector

• Agricultural productivity is low, with crop yields per hectare and water productivity per cubic meter far below international benchmarks.
• Agricultural growth has been below 3% for the past five years, despite its crucial role in the economy (21% of GDP, 44% of labor force, and 78% of export earnings in FY16).
• Water stress remains a key issue, due to limited water availability, low user charges, and inadequate storage.
• Punjab's wheat procurement system generates distortions, encouraging overproduction and discouraging diversification.
• The cost of the wheat procurement program is estimated at Rs. 35 billion annually.

Poverty and Shared Prosperity

• Despite 20 million people escaping poverty between 2001 and 2014, Punjab remains the most unequal province.
• Growth has not always been pro-poor, with poorest 40% growing less than the richest 60% during periods of fast growth.
• Human development outcomes have not kept pace with improvements in living standards, with benefits concentrated among wealthier households.

Outlook

• Growth is expected to accelerate to 5.8% in FY19, provided that structural reforms continue and external conditions remain stable.
• Potential risks include declining remittances, rising international energy prices, and slower progress in reforms.
• Sustained structural reform and international economic stability are key to maintaining growth momentum and resilience against external shocks.

Conclusion

This report underscores the importance of continued macroeconomic stability, structural reforms, and provincial collaboration in sustaining Pakistan's growth and improving human development outcomes. It highlights the need for revenue mobilization, skills development, agricultural modernization, and inclusive growth to ensure shared prosperity.