The World Bank estimated that Pakistan needed a total investment of $348 billion or 10.7% of GDP in the next eight years for a comprehensive response to climate and development concerns while recommending the government impose a carbon tax.
According to a report by the World Bank Group titled “Country Climate and Development Report (CCDR) for Pakistan” that was published on Thursday, between 2023 and 2030, approximately $348 billion (or 10.7% of total GDP) will be required in investments to address Pakistan’s climate and development challenges. This includes $196 billion for extensive decarbonization and $152 billion for adaptation and resilience.
This figure is enormous in comparison with the historic average annual development budget at the federal and provincial levels and currently available finance, which was roughly $11 billion per annum between 2011/2012 and 2014/2015.
The lack of data on investment requirements for significant transformations, such as the sustainable agri-food system, flood risk management plan, shock-responsive social protection system, and climate-resilient rural connectivity, makes it likely that the need for adaptation and resilience is underestimated. These projections point to a substantial climate and development gap, which a number of real-world solutions can help to begin closing.
Based on a retrospective analysis of funding levels in recent years, an indicative assessment suggests that the current financing composition for infrastructure projects can be estimated to be around $39 billion from public finance (including MDB financing) and $9 billion from public-private partnerships.
It is obvious that this will not be sufficient to address the above-priority transitions. The government is urged to look into repurposing subsidies in the energy, agricultural, and water sectors as well as boosting tax and tariff collection as Pakistan requests further international funding.
Through carefully targeted programs and transfers, this can be accomplished while safeguarding the most vulnerable and impoverished people. Pakistan could, specifically, uphold its commitment to energy decarbonization and quicken a thorough energy sector reform that includes testing carbon price mechanisms. The total revenue from these policies, if fully implemented, could reach $10 billion annually.
According to the WB’s statement issued here, climate change-induced disasters could significantly set back Pakistan’s development ambitions and its ability to reduce poverty. To foster people-centric climate adaptation and resilience, the country needs fundamental shifts in its development path and policies, requiring substantial investments including international support. The report notes that the combined risks of extreme climate-related events, environmental degradation, and air pollution are projected to reduce Pakistan’s GDP by at least 18 to 20% by 2050. This will stall progress on economic development and poverty reduction.
