Pakistan must go for privatisation, ending untargeted subsidies: World Bank

Pakistan must go for privatisation, ending untargeted subsidies: World Bank


Calls broadening tax base, reducing federal expenditure in areas devolved to provinces

  • Says inflation is projected to remain elevated at 26.0pc in FY24 due to higher domestic energy prices
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WASHINGTON (Web Desk) – Pakistan needs to improve the quality of expenditures and reduce the distortive presence of the state in the economy by going for privatisation of the state-owned enterprises as well as the untargeted subsidies and the federal expenditures in areas devolved to provinces, says the World Bank.

Read more: Bids from interested parties invited for PIA privatisation

In a latest report “Pakistan Development Update April 2024: Fiscal Impact of the Federal State Owned Enterprises”, the World Bank also stressed the need for broadening the tax base by targeting the agriculture, retail, and property sectors.

It also called for reduced tax exemptions and loopholes as well as improved administration, particularly via digitalisation in the taxation system.

As far as the regulatory constraints are concerned, the World Bank recommended encouraging the private sector activity by cutting red tape as well as barriers to foreign investment.

Read more: South Asia jobs creation lags population growth: World Bank

It also sees “anti-export bias” which it sees in trade policy and stressed the need for tariff rationalization and reform of export subsidy schemes.

And just like the International Monetary Fund (IMF), the World Bank report points to addressing “inefficiencies and high costs in the energy sector including continued tariff reform and increased private sector participation in distribution and transmission.


During the first half of the current fiscal year [July-Dec], the World Bank says the headline consumer price inflation rose to a multi-decade high of an average of 28.8pc on year-on-year basis, up from 25.0 pc in the corresponding period of FY23 [2022-23], reflecting higher domestic energy prices, continued liquidity injections into the banking sector through open market operations and domestic supply chain disruptions.

The report also says food inflation remained high, particularly impacting poor and vulnerable households that spend half of their budgets on food. Transportation costs rose faster in rural areas, increasing the cost of accessing markets, schools, and health centers for the rural poor.

It says that inflation is projected to remain elevated at 26.0pc in FY24 due to higher domestic energy prices. “With high base effects and lower projected global commodity prices, inflation is expected to moderate over the medium term.


The report says the real gross domestic product (GDP) at factor cost rose by 2.1 per cent year-on-year over July-September quarter (Q1) 2023-24 [FY24] on the back of strong agricultural output and some improvement in confidence after contracting for two consecutive quarters.

“Agricultural output expanded by 5.1pc in Q1 FY24, the highest quarterly growth on record, as conducive weather conditions contributed to strong yields. With continued import management measures, high input and borrowing costs, and weak domestic demand, the industrial sector’s activity remained weak.”

“Meanwhile, the wholesale and retail trade sub-sector benefited from the agriculture sector rebound and supported 0.8pc growth in the overall services sector output."