ISLAMABAD: The China-Pakistan Economic Corridor (CPEC) alone would not produce ideal outcomes until structural reforms are implemented in Pakistan to reap its full benefits, according to a report of the Asian Development Bank (ADB).
The Pakistan Development Update released by the World Bank shows that economic activity maintained its momentum through July-December 2021 in Pakistan. During this time, high demand pressures and rising global commodity prices resulted in double-digit inflation and a significant increase in the import bill. The rupee has suffered due to all these events. Furthermore, the long-standing structural deficiencies in the economy, such as low investment, exports, and productivity growth, pose a threat to a long-term recovery.
It has also been noted that as a result of the strengthening labor market and economic recovery, poverty measurements at the lower middle income class poverty level of $3.20 purchasing power parity (PPP) per day fell from 37% in FY20 to 34% in FY21.
On the other hand, rising food and energy prices are predicted to reduce the purchasing power of people. This is harming poor and vulnerable households that spend a larger portion of their budget on these products.
The World Bank report also shows that due to large base effects and recent monetary tightening, the real GDP (gross domestic product) growth is predicted to decelerate to 4.3% and 4.0% in FY22 and FY23, respectively. Following this, if the structural changes to promote fiscal sustainability and macroeconomic stability are completed quickly and global inflationary pressures subside, economic growth is expected to go up to 4.2% in FY24.
The economic recovery of Pakistan demonstrates that the country has the ability to overcome economic issues. However, to maintain this economic recovery, it is required to address the long-standing structural weaknesses of the economy and improve private sector investment, exports, and productivity.
The ADB also emphasized that to get ideal outcomes from CPEC, Pakistan has to do structural reforms. Therefore, the special economic zones (SEZs) should be fully utilized as a spatial economic unit to create synergy between urban and industrial development processes.
The SEZ-based industrial and urban development has become one mode of expanding urban spaces in several countries. An economic corridor thrives as long as it rides on the inherent economic potential of a region to attract private investment. The first step is to select and prioritize a geographic region on the basis of an identified and bankable present and future economic potential. This is based on thorough economic and technological study in order to maximize economic potential and establish methods for allocating scarce resources most effectively to generate commercial possibilities, infrastructural requirements, and policy and regulatory requirements.
The ADB has advised Pakistan to develop an evidence-based targeted strategy for delivering affordable and reliable public services, including the public transport system, water supply and sanitation facilities, solid waste management, education, and skill development.
The duties and responsibilities of the federal, provincial, and local governments should be simplified, and vertical governance inequalities in income production should be addressed. This will help in the provision of essential public services such as education and healthcare. Moreover, adopting a public-private partnership model might also help in reducing the budget shortfall.
