Roadmap To Reduce Distortions In Economy Unveiled

Distortions In Economy

The World Bank found in its latest report that Pakistan’s inability to direct all of its talents and resources to the most productive uses has stifled economic growth. 

 Pakistan’s distortions in economy can grow sustainably only if the country implements productivity-boosting reforms that allow better allocation of resources to more dynamic activities and talent to more productive uses, according to the bank’s report, titled “From Swimming in the Sands to High and Low.” sustainable growth “released on Friday. 

 The report outlines an action plan to reduce the economic disruptions that currently hamper productivity growth. Key reforms include: Harmonization of direct taxes across sectors to allow more resources to flow into dynamic tradable sectors such as B.

Tradable manufacturing and services instead of real estate and non-tradable assets Reduce the anti-export bias of trade policy by lowering import tariffs and reversing the anti-diversification bias of export incentives 

 “The Pakistani distortions in economy is at a critical juncture. This could be a tipping point where the long-term structural imbalances that have hampered sustainable growth for the too long need to be urgently addressed.

The report provides a series of policy recommendations to sequentially achieve this,” said Gonzalo J. Varela, senior economist, and co-author of the report. First, disruptions that negatively impact resources and talent must be reduced, and second, business growth must be supported through intelligent interventions, not across-the-board subsidies.

Third, create distortions in economy a positive and dynamic loop between evidence and policy making by improving the feasibility analysis of publicly funded projects or programs,” said a World Bank official.” 

 Positive impact on productivity 

 The report urges Pakistan to maximize the positive impact on business and overall productivity by reducing regulatory complexity harmonizing the general sales tax (GST) in all provinces reforming the investment law to distortions in economy attract more foreign direct investment and updating bankruptcy laws to reduce the cost of liquidating unprofitable businesses 

 The Report focused on Pakistan’s performance in three areas underpinning the growth process: productivity, enterprise development and investment, and female labor market participation 

 Provides new data on Un dynamics corporate productivity in all sectors of the distortions in  economy, corporate growth and investment models, and the distribution of female talent. 


Female Participation 

 Productivity is also hampered by the fact that Pakistan does not use all of its talents.” Women in Pakistan have made advances in science, but this accumulated human capital is underutilized due to the limitations they face in participating in the labor market,” said Najy Benhassine, World Bank country director in Pakistan. 

 According to the World Bank, the female labor force participation rate in Pakistan is much lower than expected for a country at this level of development. – AFP. 

 Pakistan has significantly lower female labor force participation rates than expected for a country at its level of development. Pakistan can achieve GDP growth of between 5% and 23% by narrowing the employment gap between women and their peers, depending on the extent to which complementary labor market policies are implemented.

 If Pakistan closed the gender employment gap with Bangladesh, about 7.3 million new jobs would be created. 

 The report finds that overall productivity in Pakistan has been stagnant or declining over the past decade, mainly due to declining agricultural and agricultural productivity over time. The Covid-19 pandemic has exacerbated the distortions in economy decline in corporate productivity, which fell by 23% in 2020.

Inputs. At the same time, total factor productivity declined for most crops, but in this case with provincial heterogeneity: Punjab and Sindh performed relatively well compared to Khyber-Pakhtunkhwa or Balochistan. 

 Pakistani crop yields are very sensitive to high temperatures and fluctuations in rainfall, which poses serious threats to this crop segment due to climate change.


 Some of the government loans that distortions in economy exclude private investment are used to support businesses that may not be viable without government support. 

 Pakistan has a relatively high proportion of “zombie” companies, i.e. H. Companies that have made losses for at least three years in a row, state-owned enterprises (SOEs), and domestic family companies are therefore more likely to be zombie companies by definition and have low investment rates. 

 To increase investment rates and attract large companies that can boost markets, the country could tap its untapped FDI potential, estimated at US$2.8 billion per year. 

 The untapped potential of Pakistani direct investment is estimated at around USD 2.8 billion a year. Realizing this potential would double the current inflow.

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