ISLAMABAD – Pakistan has the potential to significantly boost its economic growth to 8% annually, provided it doubles its investment and optimizes its assets and human capital, according to Martin Raiser, the World Bank’s Vice President for South Asia.
In an interview with Bloomberg, Raiser emphasized the need for a more predictable economic environment and streamlined regulations to attract much-needed investment. He warned that without a substantial increase in investment, the country would face challenges in realizing its true growth potential.
“You can’t expect miracles with an investment-to-GDP ratio of just 12%,” Raiser said, stressing that current levels of investment are insufficient for sustainable economic expansion. “If you’re not investing, you’re not going to grow. It’s as simple as that.”
In recent years, Pakistan’s investment-to-GDP ratio has consistently fallen below 15%, the lowest in the region. As a result, the country’s economic growth is expected to remain at a modest 3% for the year, according to a Bloomberg survey of economists. This slowdown is partly due to a combination of imbalanced fiscal policies and escalating debt levels, which have left little room for investment in critical sectors such as health and education.
The World Bank’s Vice President underscored the importance of stabilizing the business climate to foster a more conducive environment for investment. This includes reducing the unpredictability of economic policies and simplifying regulations to attract foreign and domestic investors. In line with this goal, the World Bank recently approved a 10-year partnership framework with Pakistan to help strengthen the country’s economic stability and foster long-term growth.
Raiser also highlighted the country’s ongoing struggle with cyclical economic downturns, driven by its fiscal challenges. Much of Pakistan’s government revenue is consumed by debt repayments and defense spending, leaving limited resources for essential public services. He called for urgent reforms to address these issues and unlock the full potential of Pakistan’s economy.
Prime Minister Shehbaz Sharif has set a modest growth target of 3.6% by the end of June 2025, following the country’s near-miss of an economic default last year. The government has entered a three-year loan agreement with the International Monetary Fund (IMF) and committed to improving revenue collection, restructuring state-owned enterprises, and tightening fiscal discipline.
Furthermore, Raiser pointed out the need for Pakistan to increase its tax-to-GDP ratio to at least 15%. While acknowledging the challenge, he described this target as “eminently doable,” proposing reforms like reducing special tax exemptions, combating tax evasion, and modernizing the tax system through digital solutions.
With targeted reforms in investment and fiscal policy, Pakistan has the potential not only to stabilize its economy but also to propel itself toward higher growth, improving living standards and unlocking opportunities for its population.
