World Bank's clarion call to Pakistan: ‘Your economic model has failed’

Pakistan Economic Crisis: The global lender urged Pakistan to take urgent steps to tax its agriculture and real estate.

Poverty in Pakistan shot up to 39.4 per cent as of last fiscal year as 12.5 million more people are suffering amid poor economic conditions, the World Bank has said, urging the cash-strapped country to take urgent steps to achieve financial stability. Unveiling draft policy notes, the Washington-based lender said that poverty in Pakistan rose within one year from 34.2 per cent to 39.4 per cent, with 12.5 million more people falling below the poverty line. About 95 million Pakistanis now live in poverty, it said.

Pakistan Economic Crisis: A woman checks rice prices at a main wholesale market in Karachi. (AFP)

“Pakistan’s economic model is no longer reducing poverty, and the living standards have fallen behind peer countries,” Tobias Haque, the World Bank’s lead country economist for Pakistan, said.

The global lender also urged Pakistan to take urgent steps to tax its agriculture and real estate and cut wasteful expenditures in order to achieve financial security. The World Bank identified low human development, unsustainable fiscal situation, over-regulated private sector, agriculture and energy sectors as the priority areas for reforms for the next government while proposing measures- immediately increase the tax-to-GDP ratio by 5 per cent and cut expenditures by about 2.7 per cent of GDP.

"The World Bank is deeply concerned about the economic situation of today,” Tobias Haque said adding that Pakistan is facing serious economic and human development crises.

Najy Benhassine, the country director for Pakistan at the World Bank, said, “This may be Pakistan’s moment for significant policy shift."

This comes as inflation soared to 27.4 per cent in August after Pakistan received USD 1.2 billion from International Monetary Fund in July, a part of the USD 3 billion bailout programme for nine months.