Pakistan's growth depends on doubling investment, economic stability: World Bank

The World Bank’s (WB) Vice President for South Asia, Martin Raiser, has reportedly claimed that Pakistan could witness a sharp increase in its growth rate if it doubles investment levels and efficiently uses its human capital and assets. According to reports, the senior official quoted that the cash-strapped nation’s annual growth rate could surge to as high as eight percent.

Commenting on the potential increase in Pakistan's investments, the official explained that this could be achieved if Islamabad streamlined its investment regulations and created a stable, predictable economic environment.

His soothing remarks turned sour as he criticised the economic roadmap Pakistan was on. He explained that the economy will not be able to grow if investment levels hover at an abysmal “12 percent of Gross Domestic Product (GDP),” implying that only a miracle could help the country attain a respectable growth rate if low levels of investment persist.

Data from the Finance Ministry serves to prove Martin Raiser correct. Currently, Pakistan has the lowest average investment-to-GDP ratio in the region. The ratio has fallen dangerously low, beyond 15 percent, in the recent past because of a multitude of factors.

Falling investment levels show that investors do not perceive Pakistan as an attractive destination for them to park their funds. This, along with other macroeconomic factors, has led economists to forecast Pakistan’s growth rate at just three percent this year.

While the growth rate seems alarmingly low, Pakistan has posted a significant economic recovery since 2023, when the economy actually shrank, according to reports. Lawmakers in Islamabad successfully pulled the economy out of the quagmire and stabilised it, to the point that analysts are now forecasting positive growth rates for Pakistan’s economy.

After successfully preventing the country from defaulting with the help of international creditors, Prime Minister Shehbaz Sharif has set a growth target of 3.6 percent which he wants to achieve by the end of Fiscal Year (FY) 2024-25. However, following the conditions laid out by the International Monetary Fund may make boosting investments a tough task.

As part of the IMF extended fund facility, the government has to boost tax collection levels, which might create downward pressure on investment levels. However, the privatisation drive associated with the IMF programme could bring in investments, especially from abroad.

The WB recently approved a partnership framework for Pakistan along with a $20 billion loan. According to Martin Raiser, the framework could assist Islamabad in creating a more stable business environment.