Pakistan Development Update, April 2015
The Pakistani economy faced four major domestic shocks as of April 2015: (i) a political sit-in by opposition parties in Islamabad that lasted between August and December and raised significant political uncertainty; (ii) the September floods in Pu...
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| Format: | Report |
| Language: | English en_US |
| Published: |
Washington, DC
2015
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| Online Access: | http://documents.worldbank.org/curated/en/2015/04/24366175/pakistan-development-update http://hdl.handle.net/10986/21752 |
| Summary: | The Pakistani economy faced four major
domestic shocks as of April 2015: (i) a political sit-in by
opposition parties in Islamabad that lasted between August
and December and raised significant political uncertainty;
(ii) the September floods in Punjab that affected
agricultural crops; (iii) the postponed sale of Oil and Gas
Development Company Limited (OGDCL) equity shares in
November that reduced its expected privatization proceeds
and foreign direct inflows (FDI); and (iv) the terrorist
attack in a school in Peshawar that heightened security
concerns. However, supported by a favorable slump in
international oil prices, and steady implementation of
structural reforms by the government, the economy is
improving. Preliminary data for the first half of FY15 show
growth picking up, driven mainly by strong performance in
the agriculture and services sectors. Despite the floods
last year, growth improved in the cotton, wheat, and rice
crops. The services sector was boosted by transport,
storage, communications, finance, and insurance. On the
demand side, growth continues to be driven by private
consumption partly fuelled by high remittance inflows.
Credit to the private sector continued to grow, but slightly
less rapidly than last year: as a percentage of GDP, it fell
to 13.4 percent in January 2015 compared with 14.1 percent
in January 2014. Pakistan is on track to meet a fiscal
deficit target of 4.8 percent of GDP in FY15. The newly
elected government appears to be committed to fiscal
discipline and has made fiscal consolidation the cornerstone
of its economic program supported by the IMF, the World Bank
and other donors. At present, Pakistan is facing three
sources of risk: first is the prospect of an early reversal
of the fall in oil prices. Second is the repeat of political
events of the first half that keep FDI flows and private
investment low; and also affects foreign reserves,
privatization program and growth prospects. An uncertain
political environment undermines investor confidence and
depresses economic activity. Third is the continuation of a
troubled domestic energy sector that continues to endure a
long-due complex inheritance on its circular debt. Given
past trends and the current growth rate, poverty is expected
to continue to fall and shared prosperity to improve in this
and the next fiscal year. However, a large mass of the
population is clustered around the official poverty line, so
that small improvements in household real consumption can
translate into substantial movement in poverty in either direction. |
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