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Spend less on defence and more on human development, World Bank tells Pakistan

March 18, 2019
Spend less on defence and more on human development, World Bank tells Pakistan

If Pakistan wants to be a strong upper middle-income country by the time it turns 100, it has to reduce its population growth rate by half and more than double its spending on education and healthcare, World Bank said in its latest policy report ‘Pakistan@100: Shaping The Future’.

The global lender has expressed its concerns on the ever increasing defence expenditures in the South Asia region amid recent tensions between India and Pakistan.

“India’s defence expenditures are seven times higher than Pakistan’s while Pakistan spends almost 70% of its revenues on military and interest spending,” says WB.

The report pointed out that the smaller size of Pakistan’s economy vis-à-vis India means that, although as a share of GDP military spending is significantly higher than India’s, in absolute terms it is vastly outspent by India.

Related: Talks with the IMF over possible bailout package have entered the final stages, says Asad Umar

“Pakistan has allocated a large amount of resources to developing and maintaining strong military capabilities. Pakistan’s spending on its military detracts from how much it can spend on other development priorities,” it says.

Strained regional relations affect trade, opportunities for regional cooperation and countries’ domestic policies.

Stronger regional relations can support Pakistan’s economic transformation and security objectives, increasing its leverage to resolve disputes with its neighbours and freeing resources for public investment in economic and human development, it elaborated.

“Peace is the best driver for economic growth and shared prosperity. We have seen how persisting conflicts can damage society, community and the economy as a whole. We believe peace brings economic dividends for a country and I think those kind of dividends can help Pakistan towards it two trillion dollar economy by 2047,” World Bank Country Director for Pakistan Patchamuthu Illangovan told SAMAA Digital on the eve of the report launch in Islamabad.

Related: More unemployment and layoffs likely in Pakistan: Fitch

Previous efforts to normalise relations in the region have had missed results and Pakistan cannot reduce tensions in the region on its own; other countries also need to play their part, said the WB report.

Today Pakistan’s economy is relatively closed to global and regional markets, limiting its ability to benefit from its pivotal geographical situation, said the report.

Pakistan’s average economic growth rate has been declining over the past 30 to 40 years, with periods of accelerating growth usually followed by a crisis, mentioned in the report.

Where else do we need to improve?

The report seeks to identify the main changes that will be necessary if Pakistan is to become a strong upper middle-income country by 2047. It identifies seven areas of reforms. On top of these reforms lies a proposal to reduce the country’s fertility rate to 1.2% by 2047, down from 2.4% as of 2017.

Related: Pakistan’s trade gap reduces by more than $2b

“Reduce fertility rates through the implementation of comprehensive awareness programs to encourage informed decisions on parenthood, including information on birth control, reproductive health, young women’s health and child development through health, nutrition and stimulation,” the report said.

The WB also recommends the government achieve efficiencies on public spending. After achieving higher fiscal space, Pakistan should increase spending on health to 2% of the GDP, up from less than 1% as of now. It also suggests improving spending on education to 5% of the GDP from the current 2%.

Pakistan has several difficult decisions to make, says the Washington-based think tank. Despite a challenging start and a complex political history, Pakistan’s economy grew fast in its earlier years, improving the lives of its citizens. “Pakistan was considered an example of successful development in its first 30 years. This has since changed, and Pakistan is struggling to keep pace with the growth and transformation of its peers,” it says.

Among other reforms, WB recommends a tax-to-GDP ratio of 20% by 2030, up from the current 13%. Reform tax administration, making systems efficient and people friendly, it says.  Similarly, it wants to see Pakistan at number 50 in World Bank’s Ease of Doing Business ranking come 2023. This can be done by reducing red tape and introducing legal reforms.

Related: Government unveils five-year plan for Pakistan’s economic growth

The WB says Pakistan should open its market for regional trade by adopting a simple, transparent tariff structure with reduced tariffs and clear and transparent rules and support greater integration efforts within the South Asia region. Greater regional integration can take Pakistan’s trade with its neighbors to $58 billion in the next 10 years from $18.5 billion (as of 2015).

The decisions Pakistan will take over the next decade will determine its future, WB says raising some pressing questions: will Pakistan rise to the challenges ahead and transform its economy? Or will Pakistan continue with the mixed record of reform implementation, failing to address the key constraints to growth, while another generation of Pakistanis sees limited welfare improvements?

The report and the relevant policy note provide a vision of the type of economy that Pakistan could have by 2047. The report illustrates the type of changes that are possible, and it discusses a limited number of priority reforms that will be necessary to address the most pressing constraints to accelerating and sustaining growth.

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10 Comments

  1. Avatar
      James  March 18, 2019 7:17 pm/ Reply

    Pakistan is obsessed with Kashmir and always think India is the enemy. This kept the development of country on back burner and spent vital resources to maintain the large military. It does not have good neighborly relations to three major countries it border with. This kept it to develop the terrorist network to hurt their neighbors but not realized that same ‘snake’ can bit the people of its own country.

  2. Avatar
      Alansaralhaq  March 18, 2019 11:44 pm/ Reply

    In response to James.

    I am a Kashmiri we refer ourselves as Azad Kashmiri. Azad meaning free, free from Indian genocide, rape, abductions, extra judicial killings that my brethren my blood suffer at the hands of India.

    Pakistan does not obsess over Kashmir. Rather Pakistan is the modern Indus Valley and this valley begins in Kashmir. We Kashmiri are the same ethnicity, same geography, same history, same religion, same language ( same root language and words as Pakistan) so Pakistan is not obsessed with Kashmir. Nor are we Kashmiris obsessed with Pakistan but we are an oppressed people dying and Pakistan defends the oppressed and in this case we are the kith and kin of the brutally occupied Indian Kashmiris.

    If we have to eat grass to coin a great Pakistanis words we will but defence from a belligerent psychotic India is absolutely needed and it is this deterrence that creates a status quo in this region from India psychotic designs and stops short from full genocide a d displacement of Kashmiris by India.

    1 million Kashmiris massacred by India since 1947 and a little bit more if you include Hindu Dogra occupation.
    1 million Kashmiris have been displaced into Pakistan since 1947 and an equal number if you include Hindu Dogra occupation.
    20,000 reported rapenof Muslim Kashmiri women bu Indian security forces since 1989 the real number is much much higher.

    So the World Bank can shove their assessment. Pakistan needs to stop these catastrophic policies mandated by corrupted institutions like WB, IMF. We have hold, gas, oil and other natural resources. We must focus on CPEC and above all WE must never forget Kashmiris and never stop our guard from Hindu Terrorism and belligerence emanating from India.

    Pakistan and Pakistanis know what needs to be done and our military/ AF/ navy is the most important pillar, institute in our country and need to remain strong.

  3. Avatar
      Ameen  March 18, 2019 11:49 pm/ Reply

    James aka something Patel pretending to be a white man.

    You Indian trolls are truly pathetic.

    We have good relationships with Afghans but not the corrupt government that has no sway or control outside Kabul.

    We have good relationships with Iran and have always had good relationships with Iran.

    India is the biggest sponsor of terror in the region and seeks to create satellite states around her and further afield but we are Pakistan, the heir to the mighty Mughal empire and Indus Valley Civilisation and our rise is inevitable.

    We will never lose our guard to the civilisation that came out of the filthy rotten polluted Ganges river.

    We are the Indus a rich vibrant history behind us and a rich vibrant future before us.

  4. Avatar
      Naveed  March 19, 2019 1:55 am/ Reply

    Tell this to India. Despite spending 7 times more on defence than Pakistan, the country can’t afford to feed it’s soldiers and buy advance equipment. More than 60% of population living below poverty line. India screams from thier lungs “India is shinning” but reality they are still viewed as large market by west for thier export and nothing more than that. Wake up to reality until it is too late.

  5. Avatar
      James bond  March 19, 2019 2:41 pm/ Reply

    @naveed
    You need to have a good read regarding Indian economy and its capabilities. Don’t just believe on the data of 1950s. India’s defence expenditure is well in limit with regards of gdp size.
    Anyway just for your information, My company’s market cap is equal to Pakistan’s gdp which implicitly mean it can buy pakistan by its own funds. And to your surprise there are many of such.
    Focus on your internal issues, that way you better serve your country.

  6. Avatar
      Jamal Daudpota  March 19, 2019 5:36 pm/ Reply

    This is very misleading:

    “India’s defence expenditures are seven times higher than Pakistan’s while Pakistan spends almost 70% of its revenues on military and interest spending,” says WB.

    In reality, only around 18.5% is defence and the rest is debt servicing. Download the budget statement from http://www.finance.gov.pk/fb_2018_19.html and see for yourself.

  7. Avatar
      Mustafa  March 19, 2019 7:45 pm/ Reply

    The world bank needs to focus more on academic rigour and less on politics. I remember that debacle with their remitence study and the botched methodology. These imbeciles are used to dealing with tin pot African countries who are awe struck by fancy cars and suits.

    Any one with half a functional braincell can see past the nonsense produced by kaiser Bengali and his brady bunch of morons in Islamabad. Pakistanis can see through your agenda driven rantings and understand full well why debt repaymemt and defence are clubbed together.

    As far as the budget goes, when viewed in light of the 18th amendment and 7th NFC, the federation has nothing left to allocate to. Besides that both health and education are devolved/provincial topics and not the responsibility of the federation.

    I pity your ignorance in assuming your reports have any value especially given the fact that you still don’t know whether to place the poverty line at $2 Or $3.5 in Pakistan.

    Besides, anyone who has ever read a word of history will tell you that when geopolitics and international development are in conflict, the former prevails.

    Pakistan will.never follow your Structural adjustment programmes nor will it become another castrated region like Ukraine.

    Shame on you

  8. Avatar
      Abbas  March 19, 2019 11:52 pm/ Reply

    Any country should not tolerate terrorism, Terrorism is the evil, Pakistan lost great leaders because of terrorism, if Pakistan acts on terrorism then Pakistan is the first country will benefit from it. We can see great decisions by new leadership under Imran Khan, that’s really great. Humanity and Kindness is first than Terrorism and Religious (could be any religion) beliefs which written thousands of years back in which no governance and laws were there!. Human living condition should be improved, Every human being should live happily.

  9. Avatar
      Farhad Faisal  March 20, 2019 10:31 am/ Reply

    Both India and Pakistan waste huge resources on military spending. This hurts both but more so Pakistan, being much smaller. The people of Kashmir are under occupation by both the countries for over seventy years now. The only solution for the two occupations to end would be for the two countries to negotiate and simultaneously agree to let Kashmir be an independent state, as well as accept it as a ‘buffer’ state between them. To this end they can begin to negotiate on their own. Should they need any help towards it, the outside world should be ready to do so.

  10. Avatar
      dada  March 22, 2019 5:55 am/ Reply

    pakistanis and indians are suprised from thier overseas relatives when told what good friends they have from the apposing country.

    in fact all other nationals feel like aliens to them.

    this is just relatives sqabbling. let peace prevail instead of tears from wailing widows

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