World Bank Country Director Najy Benhassine Highlights Failures in Pakistan’s Economic Model
In a recent Policy Vision article featured in the latest UNDP publication, World Bank Country Director Najy Benhassine criticized Pakistan’s current economic model. He emphasized the urgent need for policy changes to address issues that have hindered development and disproportionately benefited a select few.
Benhassine pointed out that Pakistan’s economic model has fallen behind its peers, leading to a reversal of significant progress in poverty reduction. The benefits of economic growth, he noted, have primarily accrued to a narrow elite, contributing to a consensus that demands action to rectify these imbalances.
In the Development Advocate Pakistan, UNDP’s quarterly development magazine, Benhassine underscored Pakistan’s vulnerability to climate change, with evident impacts from climate shocks and natural disasters. He stressed the necessity of addressing policy failures and distortions in the crucial agri-food and energy sectors.
For agriculture, Benhassine called for reforms to eliminate subsidies and price restrictions that trap smallholder farmers in a low-value farming system. He advocated for changes that discourage resource-intensive and environmentally damaging production practices.
In the energy sector, the World Bank official recommended consolidating progress towards financial sustainability and enhancing the efficiency of distribution companies. He suggested increased private participation and the reduction of high electricity generation costs through a greater focus on renewable energy.
While acknowledging the well-established need for policy shifts, Benhassine highlighted the potential challenges and opposition to reform efforts. He posed a crucial question about whether those with power and influence would seize the opportunity presented by the current crisis to implement necessary changes. Benhassine concluded by urging Pakistan to unite in the pursuit of a brighter, more prosperous, and sustainable future.
He emphasized the urgent need for significant improvements in fiscal management, citing unsustainable levels of debt servicing costs and domestic revenue mobilization. These challenges, he noted, leave insufficient resources for investments in human development, infrastructure, tackling economic issues, and adapting to a changing climate.
To address these issues, reforms are essential to consolidate and enhance the quality of government spending. This includes the reduction of regressive and distortionary subsidies and minimizing losses from inefficient state-owned enterprises, particularly in the energy sector.
The World Bank official proposed raising more revenue from the affluent segment of the population by implementing progressive taxation on property and activities with environmental impact. Additionally, he recommended a reduction in tax exemptions.
In order to improve living standards, he stressed the importance of fostering stronger economic growth and creating a more dynamic and open economy. This entails reducing protection for inward-oriented sectors and addressing distortions in taxation that favor non-tradable goods, with the aim of promoting exports.