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Poverty has increased slightly amid recent shocks, despite some economic stabilization. Pakistan made significant progress towards reducing poverty between 2001 and 2018 with the expansion of off-farm economic opportunities and increased external remittances. However, this has not fully translated into improved socio-economic conditions: over one-third of school-age children across Pakistan were found to be out of school; nearly two-thirds of those in school in FY24 were learning deprived; and alarmingly high rates of stunting - 40 percent in FY23 - persist. Critical constraints, including recurrent fiscal and current account deficits, protectionist trade policies, unproductive agriculture, a difficult business environment, a heavy state presence in the economy, and a financially unsustainable energy sector, have remained largely unaddressed, leading to slow and volatile growth. Amid the COVID-19 pandemic, the catastrophic 2022 floods and macroeconomic volatility, poverty has increased. The estimated lower-middle income poverty rate is 40.5 percent (US$3.65/day 2017 PPP) for FY24 with an additional 2.6 million Pakistanis falling below the poverty line from the year before.

Pakistan has made recent progress towards macroeconomic stabilization, but risks remain extremely high and faster sustained growth will require substantial reform. At the beginning of FY24, Pakistan's economy faced a potential economic crisis in the face of political uncertainty, global monetary policy tightening, and fiscal and external imbalances, that led to pressures on domestic prices and foreign reserves. To preserve reserves, measures to manage imports and capital outflows were introduced, which disrupted local supply chains, economic activity and exacerbated inflationary pressures. Under the interim government, an IMF Stand-By Arrangement was approved in July 2023. Consequently, exchange rate flexibility was restored, import controls were relaxed, and steps were taken to contain the fiscal deficit. Political uncertainty also diminished with the successful conduct of the general elections. Coupled with favorable weather conditions and easing external conditions, the economy began recovering in FY24. Consequently, growth of real GDP at factor cost is estimated to have risen to 2.5 percent in FY24, after contracting by 0.2 percent y-o-y in FY23. Downside risks remain high, with the outlook predicated on a new IMF-EFF program being implemented, continued fiscal restraint, and additional external financing. Heavy banking sector exposure to the sovereign, domestic policy uncertainty, geopolitical instability and delays in global monetary easing pose significant risks to the outlook. Robust economic recovery over the medium term will require the steadfast implementation of much broader fiscal and economic reforms.

GDP growth is projected to gradually recover but remain below potential. Economic activity is expected to continue recovering, with real GDP growth reaching 2.8 percent in FY25, as the economy benefits from the availability of imported inputs, easing domestic supply chain disruptions and lower inflation. Business confidence will also improve with credit rating upgrades, reduced political uncertainty, and fiscal tightening measures, such as the devolvement of constitutionally mandated expenditures to the provinces and higher agricultural income taxes. However, output growth will remain below potential as tight macroeconomic policy, elevated inflation, and policy uncertainty continue to weigh on activity. Limited growth in real wages and employment will keep the poverty rate near 40 percent through FY26. However, with continued progress on reforms and macroeconomic stability, poverty reduction is expected to gradually resume. With high base effects and lower commodity prices, inflation will slow to 11.1 percent in FY25 but remain elevated due to higher domestic energy prices, expansionary open market operations, and new taxation measures. On the external front, the CAD is forecast to remain low at 0.6 percent of GDP in FY25 but widen as domestic demand recovers. The fiscal deficit is projected to increase to 7.6 percent of GDP in FY25 due to higher interest payments but gradually decrease on fiscal tightening and falling interest payments.

The Government continues to face a challenging economic environment while maintaining progress towards macroeconomic stabilization and critical structural reforms. Downside risks to the outlook remain high, with the recovery expected to continue but predicated on the new IMF-EFF program remaining on track and on additional external financing inflows. Continued fiscal restraint will dampen aggregate demand, income, employment, and poverty alleviation. Heavy banking sector exposure to the sovereign, domestic policy uncertainty, federal-provincial government political misalignments and geopolitical instability pose significant risks. To manage these risks, it will be critical to adhere to sound overall economic management and buttress market sentiment, including through articulating and effectively implementing a clear strategy for economic recovery; constraining fiscal expenditures and carefully targeting any new expenditures; maintaining a flexible exchange rate; and remaining on-track with critical structural reforms, including those in the energy sector.

Last Updated: Oct 03, 2024

The  (CPS) for Pakistan for FY2015-20 is structured to help the country tackle the most difficult¡ªbut potentially transformational¡ªareas to reach the twin goals of poverty reduction and shared prosperity.

The Pakistan team continues to engage with stakeholders on the next Country Partnership Framework (CPF). The CPF will draw from several analytical works, including , and the recently published  and .

The four results areas of the current CPF are:

Transforming the energy sector: WBG interventions are supporting improved performance of the energy sector by supporting reforms and investments in the power sector to reduce load shedding, expand low-cost generation supply, improve transmission, improve governance and cut losses.

Supporting private sector development: A mix of budget support, investments and analytical work supports improvements in Pakistan¡¯s investment climate, in overall competitiveness, agricultural markets and productivity, and skills development. 

Reaching out to the underserved, neglected, and poor: Investments support financial inclusion, micro, small and medium enterprises (MSMEs), women and youth (including through enrollment outcomes), fragile provinces/regions and poorer districts, social protection, and resilience and adaptation to mitigate the impacts of climate change.

Accelerating improvements in service delivery: At the federal and provincial levels, the Bank supports increasing revenues to fund services and setting more ambitious stretch targets for areas that are not producing change fast enough (especially education and health). At the provincial level, this involves support to better service delivery in cities.

Cross cutting themes for the program include women¡¯s economic empowerment, climate change and resilience, and regional economic connectivity.

The WBG has third-largest portfolio of $15.7 billion in Pakistan ($11.7bn IDA, $3.8bn IBRD, $0.2mn in co-financings). The portfolio is supporting reforms and investments to strengthen institutions, particularly in fiscal management and human development. Partnerships are being strengthened at provincial levels, focusing on multi-sectoral initiatives in areas such as children's nutrition, education and skills, irrigated agriculture, tourism, disaster risk management, and urban development. Clean energy, and social/financial inclusion, both remain major priorities.

Last Updated: Oct 03, 2024

ENHANCING DISASTER RESILIENCE

As one of the countries most vulnerable to climate change, Pakistan is affected by recurring catastrophes, including the unprecedented 2022 floods, which affected an estimated 33 million people, resulting in US$14.9 billion in damages and US$15.2 billion in economic losses . Pakistan¡¯s economy continues to suffer chronic strain from prevailing and likely future threats of hazards. Since the 2005 Pakistan earthquake, which led to nearly 73,000 deaths and caused damages to over 570,000 houses, the Bank has been supporting the Government of Pakistan in shifting to an anticipatory disaster risk management approach. Initially, the Bank provided technical assistance to the government to highlight physical and fiscal risks from hazards, including risk assessments of federal and provincial capitals. In parallel, the Bank also used grant resources to build the capacity of Provincial Disaster Management Authority of Balochistan.

Following the floods of 2014, at the request of Government of Pakistan, the World Bank prepared the US$125 million IDA-funded Disaster and Climate Resilience Improvement Project (DCRIP) to support the restoration of flood protection infrastructure and strengthen government capacity to manage disasters and climate variability in Punjab. The project was successfully concluded in November 2021, achieving its intended development objectives and surpassing the targets for several key results indicators. DCRIP directly benefitted more than 8 million people, half of which are women. The project also repurposed US$7 million to support the Government of Punjab in the pandemic emergency response through procurement of personal protection and healthcare equipment.

In 2016, the Bank also prepared and delivered the US$100 million IDA-funded Sindh Resilience Project (SRP) to mitigate flood and drought risks in selected areas, and strengthen Government of Sindh's capacity to manage natural disasters. About 5.75 million people across the province have benefitted from project interventions till date. The drought mitigation component of the project, comprising construction of small groundwater recharge dams, has already started generating strong development impacts for the target communities. In 2021, the Bank approved an additional financing of US$200 million to scale up the small groundwater recharge dams component and set up an emergency rescue service for Sindh.

The Bank has also prepared and delivered the US$188 million IDA-funded Pakistan Hydromet and Climate Services Project which aims to strengthen Pakistan¡¯s public-sector delivery of reliable and timely hydro-meteorological services and enhance community resilience to shocks. The Contingent Emergency Response Component (CERC) was activated under this project to disburse US$150 million in response to the 2022 floods to provide cash assistance to 1.3 million flood affected families.

Furthermore, as part of comprehensive emergency response and rehabilitation support for 2022 floods, the Bank is implementing two emergency projects for the province of Sindh, which was disproportionately affected by the catastrophe. The US$500 million IDA-funded Sindh Flood Emergency Rehabilitation Project (SFERP) aims to rehabilitate damaged infrastructure and provide short-term livelihood opportunities through cash-for-work in selected areas of Sindh affected by the 2022 floods. The project is also strengthening the capacity of the Government of Sindh to respond to the impacts of climate change and natural hazards through expansion of the Sindh Emergency Rescue Service (Rescue 1122) and enhancing the preparedness of relevant line departments. In less than 2 years, the Sindh Flood Emergency Rehabilitation Project has made rapid implementation progress which is reflected in the significant results achieved till date. About 1.7 million people have benefited from rehabilitated infrastructure built to resilient standards. Meanwhile approximately 139,000 households have benefited from short term livelihoods support, of which 45 percent are women.

Similarly, the IDA-funded US$500 million Sindh Flood Emergency Housing Reconstruction Project is delivering beneficiary-driven, multi-hazard resilient reconstruction of core housing units damaged or destroyed in the floods of 2022 in selected districts of Sindh. The Project is supporting the provision of an estimated 350,000 housing subsidy cash grants and strengthening the capacity of the Government of Sindh by providing technical assistance for the overall housing reconstruction program. The Sindh Flood Emergency Housing Reconstruction Project has also achieved strong implementation progress with more than 600,000 beneficiary bank accounts opened. As of September 2024, around 137,000 core housing units have been reconstructed to multi-hazard resilient standards.

The Bank has also launched the Country Climate and Development Report (CCDR) for Pakistan. The Pakistan CCDR provides analyses and policy recommendations on harmonizing efforts to achieve further economic growth and lower poverty rates, on the one hand, with the pursuit of a climate-resilient, low-carbon, and equitable development path, on the other. The CCDR strongly emphasizes the need to build long-term resilience while exploring pathways for Pakistan to achieve deep decarbonization by 2050, and eventually reach net-zero emissions by 2070 without undermining its development ambitions.

Most recently, the Bank carried out the Pakistan Crisis Preparedness Gap Analysis (CPGA) in collaboration with the government, development partners, non-governmental organizations, and the private sector. The CPGA assesses and provides recommendations on the preparedness for natural hazards, food insecurity, and health emergencies, across five key components: Legal and Institutional Foundations; Understanding and Monitoring Risks; Financial Preparedness; Primary Response; and Social and Livelihood Support. The analysis, part of the World Bank¡¯s new Crisis Preparedness and Response Toolkit, provides a high-level overview of crisis preparedness gaps in Pakistan and provides a roadmap for future to strengthen the country¡¯s crisis preparedness.

HEALTH

Pakistan has made progress in mainstreaming the Sustainable Development Goals (SDGs) in national policies and strategies, however, there is a slow progress in improving health outcomes. According to the maternal mortality survey in 2019 [1], the country¡¯s maternal mortality ratio  was 186 deaths per 100,000 live births down from 276/100,000 live births in 2006-07. Large gaps exist across provinces with Sindh and Balochistan having twice the number of maternal deaths as compared to the national average. The country also has one of the highest infant and under-5 mortalities in the region (62 and 74 deaths per 1,000 live births, respectively). Twenty-two percent of the children born have low birth weight with variations across provinces.

On average, access to quality reproductive, maternal, newborn, child, and adolescent health with nutrition services in Pakistan is inadequate, with regional disparities. About 49 percent [2] of pregnant women do not receive the recommended four or more anti-natal care (ANC) visits essential for a safe and healthy pregnancy outcome. With 33.8 percent of births outside of health facilities, the risk of maternal and infant mortality and morbidity is high. 42 percent of women of reproductive age in Pakistan have anemia due to poor nutrition. At 3.6 births per woman [3], Pakistan¡¯s fertility rate is still relatively high, and except for Punjab, adolescent fertility has increased, and modern contraceptive prevalence rate (mCPR) has been low in the last decade at 25 percent. High fertility rate and teenage pregnancies contribute to poor maternal and child health outcomes which pose risks of death and illness.  Poor health affects all facets of women¡¯s lives including delayed development milestones, education, learning skills and gainfully participating in the labor force.

Stunting rates for children under age 5 have dropped from 45% to 40.2% from 2013 to 2018 [4]. However, it is still high and large disparities exist among provinces. This prevalence varies from 36.4% in Punjab to 46.6% in Balochistan. The average annual rate of reduction since the last 2018 National Nutrition Survey has been estimated at only 0.5 percent, which is frighteningly slow to reach the national targets. Although the situation is worse in rural and poor households, more than 20 percent of under-5 children in the wealthiest income quintile are also stunted, meaning poverty is not the only driver of stunting.

Immunization coverage for children aged 12-23 months, increased considerably over the past 8-9 years from 54% in 2013 to 77% in 2022. In Punjab 89.5% of children are fully immunized while in Khyber Pakhtunkhwa, Sindh and Balochistan 60.5%, 68%, and 37.9% are respectively fully vaccinated [5].

ľ¹ÏÓ°Ôº has been supporting the health sector in Pakistan through national and provincial projects. The ¡°National Health Support Program¡±, approved in Fiscal Year 2023, supports the strengthening of equitable delivery and quality of essential health services at the primary level and the ¡°Sindh Integrated Health and Population Project¡±, approved in Fiscal Year 2023, supports to improve quality health services in selected areas and restore and rehabilitate healthcare services impacted by floods. The ¡°Punjab Family Planning Program¡± is aimed to improve modern contraceptive prevalence rate (mCPR) while simultaneously tackling the knowledge and cultural barriers that hinder access to family planning services in the province. Provincial ¡°Human Capital Investment projects¡± are being implemented in Balochistan, Punjab and Khyber Pakhtunkhwa with the aim to improve utilization of quality health targeted and social services to the poor and vulnerable population.

ľ¹ÏÓ°Ôº also invests in analytical work through ¡°Programmatic Advisory Services and Analytics (PASA)¡±, aiming to generate evidence for reforms and provide technical support to the federal and provincial governments in implementing Universal Health Coverage in Pakistan. Additionally, the Bank is working with the Government of Pakistan, through analytics to build capacity of the country stakeholders of the human and animal sectors on health emergency preparedness and response from a one-health perspective.  The Bank is also developing thorough and comprehensive analyses on nutrition that will contribute to the development of a nation-wide program to accelerate stunting reduction in under-five children in pursuit of accumulating human capital in Pakistan.

Sources: [1] Pakistan Maternal Mortality Survey 2019; [2] Universal Health Coverage Index 2023; [3] Demographic and Health Survey 2018; [4] National Nutrition Survey 2018; [5] Third-Party Verification Immunization Coverage Survey Round Two 2022.

EDUCATION

Actions to Strengthen Performance for Inclusive and Response Education (ASPIRE) is a 5-year US$200 million program that became effective in August 2020. The program is aimed at enhanced targeting of COVID-19 education response, generating improved learning opportunities for out-of-school children (OOSC) and at-risk students, and enabling stronger federal-provincial coordination and management. To date, the Ministry of Federal Education and Professional Training (MoFEPT) and the provincial education departments have achieved four Disbursement-Linked Results (DLR): adoption of National School Health and Safety Protocols, approval of National Education Response and Resilience Plan, provision of distance learning kits to 50,000 students across the country, and provision of hygiene and cleaning kits to 20,000 public schools nationwide. The activities planned in in FY23 mostly focused on construction and rehabilitation, communication campaigns, teachers training, multi-modal programs, and specific intervention related to Out of School Children (OOSC). The ASPIRE program has also been successful at leveraging the Inter-Provincial Education Ministerial Conference (IPEMC) and the Technical Steering Committee (TSC) platforms for improved coordination between the Federal and Provincial Education Departments.

Data and Research in Education (DARE) is a US$10 million Bank Executed Trust Fund (BETF) provided by the Foreign, Commonwealth & Development Office alongside the ASPIRE program. The project supports Pakistan education sector¡¯s response and recovery by providing technical assistance to the Federal Government, in order to strengthen the education data infrastructure and coordination mechanisms between the federal and provincial governments, enhance evidence-based decision making and improve targeting of programs to reduce inequality and gender-gap. The main components under DARE include strengthening the provincial-Federal education data management processes, enhancing sector coordination on student learning outcomes and improvement of sector monitoring, evaluation and decision making by supporting policy research and impact evaluations.

Under the 5-year Higher Education Development in Pakistan (HEDP) the World Bank supports research excellence in strategic sectors of the economy, improved teaching and learning and strengthened governance in the higher education sector. The project has been successful in bringing some key reforms in the sector, including: introduction of an Undergraduate Education Policy which established the criteria for Associate Degree and transition of all Bachelor¡¯s Degree programs from two-years to four-years; research capacity development by providing competitive research, innovation, and commercialization grants, such as the Rapid Research Grants, for research on critical COVID-19 related topics and Innovative Seed Fund to support startups and entrepreneurs; expansion of digital connectivity and remote learning systems to ensure continuity of education during COVID-19 and capacity building trainings of faculty, especially females under the newly established National Academy for Higher Education.

Punjab

The Bank supports interventions in the education sector in Punjab through the Human Capital Investment project (US$200 million, with US$30 million supporting strengthening and scale-up of early childhood education in 11 districts in South Punjab). The project supports the development of a 2-year early childhood education (ECE) curriculum and strengthening of ECE services in Punjab. Currently a minimum of 11,000 ECE classrooms meet new quality standards, which include the presence of a trained teacher and caregiver as well as a kit with instructional material. In addition, content for teaching and learning materials is being updated to ensure alignment with evolving curricula and standards.  The project is also supporting rehabilitation of around 450 flood-affected schools in South Punjab.

Sindh

The 5 year Sindh Early Learning Enhancement through Classroom Transformation (SELECT) project of $155 million ¨C financed in part by grants from the Global Partnership for Education ($55 million) ¨C supports the Sindh Education Sector Plan & Roadmap (SESPR) 2019¨C2024 and targets 12 of 29 districts in Sindh with the lowest performance on education outcomes. SELECT focuses on foundational literacy and teaching quality, school construction to improve access to elementary schools and enhance school learning environments (including in flood-affected schools), school dropout prevention (especially for girls) through a student attendance monitoring and redressal system, and improved school and district-level governance.

Balochistan

The Balochistan Human Capital Investment Project (BHCIP), which became effective in 2021, is implemented together with the health sector. The education component (US$17.75 million) focuses on the improved utilization of quality education services in selected refugee hosting districts. BHCIP funds the rehabilitation of schools and upgrading of primary schools to middle and high schools, merit-based hiring of additional teachers and strengthening of the education sector stewardship. To date, BHCIP has initiated the procurement of supplies for schools, including basic furniture, ECE classroom materials, science, and IT laboratory equipment. The project also aims to improve student assessment and teacher training across the province by supporting the Balochistan Assessment and Examination Commission and Provincial Institute of Teacher Education. Use of data for decision making and schools¡¯ capacity to contribute to generating reliable data is another important element of the project that strengthens governance at school and district levels.

Khyber Pakhtunkhwa

In March 2021, the Government of Pakistan approved the US$200 million Khyber Pakhtunkhwa Human Capital Investment Project (KPHCIP) ¨C a five-year project that aims to improve the availability, utilization, and quality of primary healthcare services and elementary education services in 4 districts of Khyber Pakhtunkhwa. The districts were selected because they have some of the highest refugee populations in the province. This financing includes a grant of USD $62.5 million from the IDA18 regional sub-window for refugees and host communities (IDA-18 RSW). The education component (US$115 million) of the project focuses on improving the availability, utilization, and quality of education services in selected districts for all children, especially out-of-school children, refugees, and girls.  The project was restructured in 2023-24 to support rehabilitation and reconstruction of flood-affected schools in the original districts as well as 9 additional flood-affected refugee-hosting districts. The project is currently supporting the equipping of ECE classrooms, establishment of Accelerated Learning Pathways centers and girls¡¯ community schools, and training of teachers and school leaders.

OPERATING IN CONFLICT AREAS

In the aftermath of the militancy crisis in Pakistan, the Multi-Donor Trust Fund (MDTF) for Khyber Pakhtunkhwa (KP), Federally Administered Tribal Areas (FATA), and Balochistan was established in August 2010. The aim was to support the reconstruction, rehabilitation, reforms, and other interventions needed to build peace and create the conditions for sustainable development in the affected regions. After more than a decade of implementation, the MDTF officially closed on December 31, 2023.

In two rounds, the MDTF supported a range of projects to help build state-citizen trust in KP, FATA, and Balochistan. Round I of MDTF projects was implemented from August 2010 to March 2017 and focused on helping the provinces come out of the militancy crisis and take strides towards conflict prevention and peacebuilding. Subsequently, Round II was implemented from April 2017 to September 2023, achieving results towards reconciliation, peacebuilding and enhancing state- citizen trust by focusing on three pillars: (i) Growth and Jobs Creation; (ii) Improved Service Delivery; and (iii) Policy Reforms and Improved Governance.

The MDTF has aimed to build peace and create the conditions for sustainable development, but it has also helped address an array of immediate emergencies in Pakistan. For example, the MDTF has responded to unforeseen and immediate needs by supporting livelihood improvement measures in Balochistan in the aftermath of the 2022 floods. Furthermore, the fund was among the first to respond to the COVID-19 pandemic in Pakistan, providing much-needed resources.

The MDTF was closed on December 31, 2023, after the activities were completed and the targeted results were achieved. Of the funds of around USD 283 million, which included USD 11 million in investment income, USD 279 million (98 percent) was used for results, resulting in savings of around USD 3.6 million.

The MDTF achieved noteworthy results under its three results areas. ľ¹ÏÓ°Ôº will continue to engage with the Governments of Khyber Pakhtunkhwa and Balochistan through several projects that build on the results achieved under the MDTF.

Last Updated: Oct 03, 2024