The World Bank has revealed that poverty in the cash-strapped Pakistan has risen by 39.4% since the last fiscal year, pushing an additional 12.5 million people below the poverty line. Around 95 million people are now living under poverty in Pakistan.
In its draft policy notes prepared with the help of all stakeholders for Pakistan's next government, the World Bank said that an additional 12.5 million people have been pushed into poverty due to the country's poor economic conditions and urged Islamabad to take urgent reforms to achieve financial stability, as per the Express Tribune.
"The World Bank is deeply concerned about the economic situation of today," said the lender's lead country economist for Pakistan Tobias Haque, adding that the nation is facing serious economic and human development crises that require crucial policy shifts.
According to the Bank, Pakistan's poverty levels shot up from 34.2% to 39.4% within a year. Haque commented that Pakistan's economic model is no longer able to reduce poverty, while "living standards have fallen behind peer countries".?
World Bank's proposed measures on 'sacred cows'
The World Bank has urged Pakistan to stringent measures to tax its 'sacred cows', agriculture and real estate, by increasing the tax-to-GDP ratio by 5% and cutting wasteful expenditures by about 2.7% of GDP, in order to achieve financial stability. It also proposed withdrawal of tax exemptions and increasing burden of taxes on the real estate and the agriculture sectors.
According to the Express Tribune, Pakistan has the capacity to collect taxes equivalent to 22% of the country's GDP, but collects only 10.2%, less than half. The global lender asked Pakistan to increase taxes on land and property for another 2% of GDP in revenues and another 1% of GDP from the agricultural sector.
It also recommended withdrawing income tax exemption for power generation projects and the real estate investment trusts. The Bank called for reducing numbers of tax slabs for salaried individuals and reducing income threshold for top marginal tax brackets.
The World Bank also proposed increasing excise duties on cigarettes and harmonisation of three different valuation systems, increase in property tax rates and change in land classification for taxation purposes.
It also proposed reducing energy and commodity subsidies? while also imposing temporary austerity measures in the short term to save about 1% of the GDP equivalent expenditures. It noted that Pakistan is heavily subsidising the agricultural sector, leading to low productivity and that the Pakistani government can reduce spending of Rs 328 billion by winding up ministries that fall in the provincial domain.
Pakistan's economic crisis
The World Bank identified low human development, unsustainable fiscal situation, over-regulated private sector, agriculture and energy sectors as the priority areas for reforms for Pakistan's next government after the elections.
Earlier this year, the International Monetary Fund (IMF) approved a $3 billion 'stand-by' arrangement to support Pakistan's economic stabilisation programme. An amount of $1.2 billuion was immediately disbursed, and as a result inflation in Pakistan soured to 27.4% by August. The inflation has resulted in a fuel and electricity price hike, further burdening the masses.
Pakistan’s economy has been in a free fall mode for the last many years, bringing untold pressure on the poor masses in the form of unchecked inflation, making it almost impossible for a vast number of people to make ends meet.
It has faced several challenges in recent times, including devastating floods last year and commodity price hikes following the war in Ukraine. Over 1,500 people were killed last year during floods in Pakistan that destroyed millions of homes, wiped out swathes of farmland, and caused billions of dollars in economic losses.
(with PTI inputs)
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