Public Finance

In a bid to address Pakistan’s chronic economic vulnerabilities—from energy shortages to climate shocks and lagging human development—the World Bank has unveiled a $20 billion Country Partnership Framework (CPF) spanning 2024–2034. This ambitious lending plan, the largest in the institution’s history with Pakistan, aims to catalyze structural reforms while funding high-impact projects in infrastructure, social protection, and climate resilience. Against a backdrop of soaring public debt (88% of GDP in 2023) and stagnant GDP growth (2% in FY23), the CPF represents both a lifeline and a litmus test for Pakistan’s ability to translate financing into sustainable development.

Strategic Pillars: Where the Funds Will Flow

The CPF aligns with Pakistan’s national development goals and the UN’s Sustainable Development Agenda, prioritizing four interconnected pillars:

1. Human Capital Development (30% of funds): Targeting stunted growth (38% of under-5s) and out-of-school children (22.8 million), investments will expand conditional cash transfers via the Benazir Income Support Program (BISP) and upgrade 15,000 primary schools.
2. Climate Resilience (25% of funds): Financing flood-resistant infrastructure (e.g., Sindh’s Indus Delta rehabilitation) and renewable energy projects to boost clean power from 34% to 50% by 2030.
3. Private Sector Growth (25% of funds): Simplifying regulations to improve Pakistan’s Ease of Doing Business rank (from 108th in 2023) and co-funding SMEs in tech and agriculture.
4. Governance Reform (20% of funds): Digitizing land registries, tax systems, and procurement processes to curb leakage, which costs Pakistan $10 billion annually.

Sectoral Allocation Breakdown

Projected Outcomes: Growth with Equity

By 2034, the CPF aims to achieve measurable benchmarks:

• Reduce poverty: Cut the poverty rate from 39.4% (2023) to 25% through targeted cash transfers and job creation.
• Boost exports: Elevate exports from $32 billion (2023) to $60 billion by enhancing competitiveness in textiles, IT, and agri-processing.
• Improve energy access: Connect 10 million households to solar grids, reducing distribution losses by 15%.
• Strengthen institutions: Increase tax-to-GDP ratio from 9.5% to 15% via digitization and anti-evasion measures.

Critically, 40% of funds are conditional on achieving reform milestones, such as disbanding loss-making SOEs (e.g., PIA) and implementing progressive agriculture taxation.

Risks and Realities: Navigating Implementation Hurdles

Past World Bank programs in Pakistan have faced mixed results. The 2014–2023 CPF achieved only 63% of its targets, hampered by political instability and bureaucratic inertia. Key challenges for the new framework include:

• Debt sustainability: Pakistan’s $130 billion external debt raises concerns about repayment capacity, especially if global rates remain high.
• Climate volatility: Repeated floods could divert funds from development to disaster relief, as seen in 2022’s $16 billion flood recovery costs.
• Political consensus: Opposition-led provinces may resist centralized reforms, such as harmonizing provincial and federal tax regimes.

To mitigate risks, the World Bank plans quarterly reviews and “adaptive triggers” allowing reallocation if projects underperform.

A Decade of Decisive Action

The CPF’s success hinges on Pakistan’s willingness to depoliticize economic policy and prioritize long-term gains over short-term fixes. Learning from Bangladesh’s growth trajectory—fueled by World Bank-backed garment sector reforms—Pakistan must channel investments into export-oriented industries and skills development. While the $20 billion infusion offers hope, systemic corruption, energy subsidies, and elite capture remain formidable headwinds. If implemented transparently, this partnership could redefine Pakistan’s economic future—but history cautions that optimism must be tempered with vigilance.

This article was published on PublicFinance.pk.