The ‘South Asia Economic Focus: South Asia Vaccinates, Spring 2021’ warned that more delays in the implementation of critical structural reforms could lead to further fiscal and macroeconomic imbalances.
The report said Output growth is expected to recover gradually over the medium-term, averaging 2.2 per cent over fiscal years 2021-2023, mostly due to contributions from private consumption.
However, sectors that employ the poorest, such as agriculture, are expected to remain weak, and therefore poverty is likely to remain high. The baseline outlook is predicated on the absence of significant infection flare-ups that would require more extensive lockdowns, cautions the World Bank in its twice-a-year regional update.
As critical revenue-enhancing reforms gain pace and expenditure rationalisation efforts resume, the fiscal deficit is projected to gradually narrow over the medium-term, the report says while warning that still, public debt will remain elevated in the medium term, as will Pakistan’s exposure to debt-related shocks.
Though fiscal consolidation efforts are expected to resume, the deficit is projected to remain elevated at 8.3pc of GDP in fiscal year 2021, partly due to the settlement of arrears in the power sector, the report underlines.
It goes on to add the containment measures adopted in response to the Covid-19 led to a collapse in economic activity during the final quarter of the fiscal year 2020, and as a result, GDP is estimated to have contracted by 1.5pc in the fiscal year 2020.