The World Bank has urged Pakistan to significantly boost its investment levels in order to stimulate economic growth and improve the country’s long-term prospects. According to Martin Raiser, the bank’s Vice President for South Asia, the South Asian nation must simplify its regulatory environment and create a more predictable economic outlook to attract the necessary capital. In a recent interview with Bloomberg, Raiser emphasized that doubling the current levels of investment could propel Pakistan’s annual growth rate to as high as 8%.
Pakistan’s current investment-to-GDP ratio remains a critical concern, as it has fallen below 15% in recent years—the lowest among its regional peers. The country’s economy is currently forecast to grow by only 3% this year, a rate that highlights the need for more robust investment if Pakistan is to meet its potential. Raiser noted that a low investment-to-GDP ratio stifles growth, stating, “If you invest 12% of gross domestic product, don’t expect miracles. You’re not going to grow. It’s as simple as that.”
The need for increased investment has become even more urgent given Pakistan’s economic challenges, including fiscal instability, insufficient funding for key sectors like health and education, and a heavy reliance on debt servicing. A significant portion of the government’s revenue is spent on debt repayment and defense, leaving little room for investments in critical infrastructure and social programs.
The World Bank’s recommendation comes at a time when Pakistan is seeking ways to achieve sustainable growth after years of economic volatility. The country has been plagued by boom-and-bust cycles driven by imbalanced fiscal policies and unsustainable financial practices. Raiser highlighted that Pakistan’s economy can experience higher growth by better utilizing its assets, including human capital and natural resources. By focusing on boosting investment and improving efficiency, Pakistan could create a more stable and sustainable growth model.
Last week, the World Bank approved a 10-year partnership framework for Pakistan, aimed at helping the government stabilize the country’s business environment. This partnership underscores the importance of creating a conducive environment for foreign and domestic investment, which will be crucial for the country’s long-term development. The framework will focus on fostering stability, promoting investment, and improving governance in key sectors.
Prime Minister Shehbaz Sharif has set an ambitious target of achieving 3.6% growth by the end of June 2025, following the country’s close call with economic default last year. Pakistan narrowly avoided a default with external assistance, including a loan program from the International Monetary Fund (IMF). Under the IMF’s three-year loan program, Sharif’s government has committed to raising government revenue and plugging financial leaks, with a focus on restructuring and privatizing state-owned enterprises.
One of the key strategies for improving the country’s fiscal health is increasing the tax-to-GDP ratio, which currently stands well below regional standards. Raiser pointed out that raising the tax-to-GDP ratio to 15% is “eminently doable” through measures such as cutting tax exemptions, targeting special interests, and cracking down on tax evasion. He also emphasized the importance of modernizing Pakistan’s tax collection system by digitalizing the process, which would improve efficiency and reduce leakage.
Pakistan’s economic outlook depends heavily on its ability to attract more investment, streamline its regulatory processes, and enhance its tax revenue. With the right policies in place, the country could move away from its current boom-and-bust cycles and build a more resilient economy. The World Bank’s guidance serves as a reminder that investment, both public and private, is the key to unlocking Pakistan’s growth potential and achieving long-term stability.