ISLAMABAD: The World Bank has urged Pakistan to accelerate private investment, warning that current levels remain significantly below the targets set under the Country Partnership Framework (CPF) 2026–35, despite recent improvements in macroeconomic stability.
The call was made during a meeting between Federal Minister for Finance and Revenue Muhammad Aurangzeb and World Bank Country Director for Pakistan Bolormaa Amgaabazar, along with their respective teams, to review ongoing collaboration and discuss priority reform areas under the CPF. The World Bank emphasized that raising productive private investment is central to achieving sustained economic growth, export expansion, and job creation over the next decade.
According to the World Bank, Pakistan’s private investment has remained stuck at around 10 percent of GDP, far below regional peers such as India and Bangladesh, where private investment ranges between 20 and 25 percent of GDP. This underperformance reflects deep-rooted policy and institutional weaknesses, including excessive regulation, subsidies, high taxes, trade protection, and the dominant role of state-owned enterprises (SOEs), all of which have suppressed productivity and export competitiveness.
The CPF highlights that Pakistan’s exports have also weakened structurally, declining from around 16 percent of GDP in the 1990s to nearly 10 percent today. The World Bank noted that without decisive reforms to improve the business environment, Pakistan risks missing out on an estimated additional export potential of $60 billion annually.
To address these challenges, the World Bank proposed a results-based approach anchored in clear policy milestones, measurable performance indicators, and targeted technical assistance. This framework aims to accelerate reform implementation, improve accountability, and unlock private investment by focusing on tangible outcomes rather than procedural compliance.
During the meeting, the World Bank team briefed the Finance Minister on the progress of ongoing operations under the CPF, including developments in fiscal and revenue reforms, macroeconomic stabilization efforts, and policy-based engagements. Both sides acknowledged that Pakistan has made progress in stabilizing the economy through prudent fiscal and monetary policies, but stressed that stability must now translate into higher investment, productivity gains, and employment generation.
Discussions focused on designing a coherent and programmatic investment framework aligned with CPF objectives. Key reform areas included business environment reforms, SOE restructuring and governance improvements, trade facilitation, capital market development, and measures to enhance export competitiveness.
Finance Minister Muhammad Aurangzeb reaffirmed the government’s commitment to structural reforms already underway. He highlighted initiatives such as tariff rationalisation, improved SOE governance, regulatory modernisation, and transparency measures aimed at reducing distortions and encouraging private sector participation. He also stressed the importance of deepening capital markets, expanding access to long-term financing, and strengthening institutional coordination to support private sector–led growth.
Employment and skills development were also discussed as critical pillars of economic expansion. The Finance Minister underscored the need for market-driven vocational and technical training, closer public-private collaboration, and better alignment of skills development with domestic and overseas labour market demand. Particular emphasis was placed on sectors such as information technology, healthcare, nursing, hospitality, and construction.
The World Bank shared details of its ongoing work on labour mobility, skills matching, and digital labour market platforms designed to enhance workforce productivity and improve overseas employment opportunities for Pakistani workers.
Sectoral priorities identified for potential future World Bank-supported operations included digital services exports, agriculture and agribusiness, minerals and mining, healthcare, and selected manufacturing segments. Both sides agreed that targeted interventions in these sectors, supported by regulatory and institutional reforms, could deliver high-impact employment growth and export diversification.
The World Bank also briefed the Finance Minister on the possible use of policy-based guarantees in future operations. These instruments could support Pakistan’s liability management, help refinance high-cost debt, and enable innovative financing solutions, subject to the achievement of agreed policy milestones.
Broader discussions also covered climate finance, regulatory streamlining, and enhanced coordination with provincial governments to ensure effective reform implementation and development financing.
Both sides agreed to continue technical-level engagements to refine priorities, narrow the scope of proposed interventions, and advance preparation of future World Bank-supported programmes in line with Pakistan’s reform agenda and the objectives of the Country Partnership Framework 2026–35.
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