IMF Report Outlines How Pakistan Can Achieve SDGs by 2030

Pakistan’s performance in critical Sustainable Development Goals (SDGs) sectors, including education, water, and sanitation lags, that of its emerging market peers, and achieving its SDGs by 2030 would require 9 percent of GDP in additional financing each year, says the International Monetary Fund (IMF).

IMF said this in its latest report, “A Post-Pandemic Assessment of the Sustainable Development Goals,” adding that public spending has been insufficient to meet the needs of a fast-growing young population.

“Without additional resources to offset the costs of the pandemic (on top of the substantial additional pre-COVID funding needs), achievement of the SDGs will be delayed by one year for Cambodia and four to six years for Rwanda, Pakistan, and Nigeria. There could be an even greater delay if the pandemic persists longer than expected,” it added.

While Pakistan has made some progress on development amid volatile economic performance and fast population growth, its performance in critical SDG sectors lags behind its emerging market peers.

In areas of education, water, and sanitation, it is below the Low-income developing countries’ (LIDCs) average.

The Fund stated that Pakistan achieved mixed economic and social development results over the past two decades. Short episodes of fast growth were soon followed by downturns, on the back of unbalanced policies and unfinished reforms, together with a challenging geopolitical and security situation.

Despite a notable reduction in poverty, Pakistan’s current performance in critical SDG sectors lags behind its peers. Achieving its SDGs by 2030 would require 9 percent of GDP in additional financing each year.

The impact of the COVID-19 crisis is severe, and the recovery is expected to be subdued. As a result of containment and mitigation measures and the global fallout from the pandemic, real GDP is estimated to have contracted by 0.4 percent in the fiscal year 2020 (July 1, 2019–June 30, 2020).

While the authorities’ actions have supported an incipient recovery, economic growth is expected to return to its pre-pandemic rate of 4.5 to 5 percent only in the medium term. As a result, the country faces a permanent loss of almost 6 percent of output, and the fiscal space available to finance the SDGs has shrunk.

Pakistan needs to pursue comprehensive reforms to generate the resources to fund its development ambitions, the report added.

The report outlines the following reforms that may help Pakistan in coping with the crisis better:

Further revenue mobilization efforts

Following the authorities’ commitment to important reforms in this area, our baseline scenario includes an increase in tax revenues of 3 percent of GDP during 2020– 23. Still, there is room for additional improvement beyond 2023 by ensuring full harmonization of sales tax across Federal and provincial levels, further broadening of the tax base to include the agricultural sector, expanding the services tax base, and strengthening the property tax system. We assume the authorities can generate additional tax revenue of 2 percent of GDP during 2024–26.

Reforming the energy sector and inefficient state-owned enterprises (SOEs)

Comprehensive reform to address structural weakness in these areas should include the introduction of an energy pricing structure reflective of costs, improved efficiency, enhanced transparency, and a legal framework for the governance of SOEs. A triage exercise for all SOEs should determine their viability and may lead to the privatization of some enterprises. IMF estimates that these policies can free up 1.25 percent of GDP in resources for development.

Attracting private investment

Improving the business environment, which suffers from weak governance and institutions and stifling regulation, is crucial to attracting private investment to stimulate growth and ensure SDG financing. Foreign investment in Pakistan is low. Bringing it in line with peers’ median would result in an additional 3.4 percent of GDP in private investment for development.

These reforms could generate enough resources to finance some 57 percent of Pakistan’s SDG needs and significantly boost per capita income. However, even with these reforms, the country would still need to find 3.9 percent of GDP in additional resources to meet its SDG targets by 2030,” it added.

The Pakistani authorities have started to implement tax policy and revenue administration reforms that could help raise the tax revenue ratio by more than three percentage points of GDP over four years, the report noted.

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