This document discusses financing development in Pakistan. It notes that Pakistan has low GDP per capita and high poverty and stunting rates. It has weak institutions and a poor record of achieving past development goals like the MDGs. Pakistan has a low tax-to-GDP ratio and struggles to attract private financing due to economic and political instability. The document argues that international institutions should provide capacity-building funds to help Pakistan improve its ability to mobilize domestic resources and attract private investment to help achieve development goals like the SDGs by focusing on education and health.
2. Situation Analysis
• Pakistan’s per capita GDP is just a shy above
$1200.
• More than two-thirds of the population is
poor.
• Stunting is estimated to be 45 percent.
• There are almost 50 students for each teacher
in primary schools.
• Frequently visited by devastating floods and
earthquakes.
4. Primary Proposal
• Financing should take into the account the
already dwindled capacity of the under
developed countries to absorb financial flows
and utilize them.
• There is a lack of incentive for the private
lenders for advancing development funds to
already debt-drenched economies.
5. Capacities of underdeveloped
countries
• Efficient and effective usage of financial funds
for development is linked to a good
institutional environment.
• Pakistan has consistently received low score in
institutional assessments indicators.
• In terms of economic freedom, Pakistan is also
well stacked below.
7. Institution quality indicators
Average CPI
Average score
economic
institutions*
Average score
legal
institutions*
Average score
political
institutions*
2001-2005 2.3 0.4 0.3 0.2
2006-2010 2.4 0.5 0.4 0.3
2010-2014 2.7 - - -
* Institutional quality indicators complied by Kuncic, 2013.
8. Pakistan’s debt position
• Pakistan’s economy has suffering from chronic
un-sustainability of public.
• Foreign financial ratings institutions have
often cited Pakistan government bonds has
some of the most riskiest in the world.
• Pakistan debt stocks are also highly un-
sustainable (see figure on the next slide).
10. Further Evidence - Pakistan’s poor
performance in meetings MDGs
• Pakistan was ranked 6th among South Asian Economies
in terms of MDGs performance.
• Despite the fact that Pakistan was one of the principle
recipient country of foreign aid.
• This stalled performance can be linked to the
institutional constraints already documented in this
study.
• What hope Pakistan has in achieving the SDGs?
• Why should private institutions be interested in
financing development in Pakistan?
• What role can the WB play in triggering these flows?
11. Evaluating the Public Sector
• As often suggested In the MOOC, that
domestic resource mobilization holds the key
for development financing.
• Pakistan tax-to-GDP ratio hovers over 10
percent of GDP and is the lowest in the world.
• Tax administration is highly inefficient.
• Government has time and again failed to
increase tax net.
12. Evaluating the private sector
• Private sector faces massive disincentive in
investing in the local economy.
• Most of the local industries have already moved
to neighboring countries.
• Foreign firms are also wrapping up businesses.
Siemens shut down its power transformers
distribution company.
• Equity & capital markets are not all-
encompassing in its portfolio.
• Most investors resort to shifting money in riskless
endeavors.
13. The way forward
• First its of crucial importance to mobilize
private investors’ interest in the local
economy.
• WBG and other IFIs can play an integral role in
this regard by advancing capacity funds to
Pakistan.
• Foreign assistance to Pakistan has already
been low on education and health sector.
14. Where Aid goes?
0
20406080
100
Percent
2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15
Source: Annual Reports, Economic Affairs Division
(as % of Total Project Aid)
Major Heads of Project Aid
Agricutlure Education & Training
Health & Nutrition Physical Planning & Housing
Population Welfare Power
Rural Development & Poverty Reduction Transport & Communication
Water Governance, Research, Statistics
Others
15. SDGs
• Health and education is to play an important
role in achievement since most of the targets
are directly or indirectly related to
improvements in health and education.
• Result-oriented advices must be advanced by
international institutions on improving
Pakistan tax ratio.