Pakistan economy enjoys strong recovery after COVID-19 crisis – World Bank

People trade watermelons at a fruit market in Lahore, Pakistan, on April 12, 2022. (AFP/File)

• The recovery indicates Pakistan has enormous potential to overcome economic situations, says World Bank report
• Government should focus on containing the fiscal deficit to mitigate immediate macroeconomic risks, it suggests

ISLAMABAD: The World Bank on Tuesday said Pakistan’s economy enjoyed a strong recovery and grew 5.6 percent in Fiscal Year 2021 (FY21) due to the government’s measures to mitigate the adverse socio-economic impacts of the COVID-19 pandemic. 
Prime Minister Shehbaz Sharif’s new administration of in Pakistan has decided to start engaging the International Monetary Fund (IMF) for the completion of a seventh review of the $6 billion loan program signed between the two sides in July 2019 to overcome economic hardships. 
Sharif, who was elected on April 1, faces the daunting task of managing a stuttering economy with huge deficits. 
But the World Bank, in its Pakistan Development Update on Tuesday, said the economic activity maintained its momentum during July-December 2021 in Pakistan. 
“Pakistan’s economic recovery after the COVID-19 crisis indicates that the country has enormous potential to overcome challenging economic situations,” said Najy Benhassine, the World Bank country director for Pakistan. 
“However, sustaining the economic recovery requires addressing long-standing structural weaknesses of the economy and boosting private sector investment, exports and productivity.” 
The World Bank report highlighted with “economic recovery and improved labor market conditions, poverty — measured at the lower middle-income class poverty line of $3.20 Purchasing Power Parity 2011 per day — declined from 37 percent in FY20 to 34 percent in FY21.” 
It said macroeconomic risks remain very high for the South Asian country. These include tighter global financing conditions, potential further increases in world energy prices, and the possible risk of a return of stringent COVID-19-related mobility restrictions. 
Domestically, the report said, political uncertainty and policy reform slippages could also lead to protracted macroeconomic imbalances. 
“To mitigate immediate macroeconomic risks, the government should focus on containing the fiscal deficit at a level which ensures debt sustainability, closely coordinate fiscal and monetary policy, and retain exchange rate flexibility,” said Zehra Aslam, the lead author of the report.