Pakistan's economy has long been characterised by a persistent low growth rate, a trend that has become increasingly prevalent in recent years.
"To alleviate the rising poverty levels, the country must prioritise the attainment of a sustainable high growth rate as its primary objective," emphasises Dr Luis Felipe Lopez Calva, Global Director for Poverty and Equity Practices at the World Bank.
Talking to WealthPK, he pointed out that the growth rate of a country's GDP and its poverty levels were directly linked. "A high GDP reflects increased economic activity, contributing to poverty alleviation by generating employment opportunities and providing the governments with enough revenues to invest in poverty alleviation programmes," he explained.
"Pakistan's GDP, in contrast, shows a gloomy picture," he said.
According to the Pakistan Development Update by the World Bank, the poverty rate is expected to reach 37.2% (as per the WB standard of $2.15 per day) in the ongoing financial year 2023-24.
As reported by the Ministry of Finance, the real GDP posted a growth of only 0.29% in FY23 as in the first quarter of the previous fiscal, floods affected large swathes of agricultural land and disrupted the domestic supply in the country. The flood damage, GDP loss, and rehabilitation expenditures were estimated, respectively, at Rs3.2 trillion ($14.9 billion), Rs3.3 trillion ($15.2 billion) and Rs3.5 trillion ($16.3 billion).
Lopez Calva highlighted that a high growth rate in Pakistan would lead to increased business activities and expansion of industries, creating more job opportunities. "A growing economy absorbs the workforce and reduces unemployment, which is key to poverty alleviation."
He said government expenditures were one of the key components of GDP. "At present, the country lacks a solid revenue base to increase the scale of government expenditures, which has a multiplier effect on economic output."
He said Pakistan needs a combination of fiscal policies and strategies to boost public spending. "Tax reforms to generate additional revenues without adversely affecting economic growth can be the first step."
Lopez Calva attributed the lack of funds for poverty alleviation programmes to the low GDP growth rate in Pakistan. "With a sustainable growth rate of more than 5%, the government will be able to generate revenues sufficient enough to execute poverty reduction initiatives."