Pakistan Development Update : Reimagining a Digital Pakistan

Overview & Synopsis

Amid a severe economic crisis, at the start of fiscal year (FY) 2024, Pakistan undertook decisive measures to prevent a sovereign default, stabilize the currency, and curb inflation. An International Monetary Fund (IMF) Stand-By Arrangement (SBA) helped to bridge financing gaps and restore confidence, allowing for the easing of import controls. However, fiscal consolidation measures, high interest rates, double-digit inflation, and supply chain disruptions weighed on economic activity, leading to declining real labor incomes and stagnating poverty. Pakistan’s key challenge is to maintain macroeconomic stability and transform recent stabilization efforts into sustainable economic growth sufficient enough to reduce poverty from current high levels (around 25.6 percent using the national poverty line). This will require reforms to make the tax system more equitable, enhance the effectiveness of public spending, resolve the accumulated circular debt in the energy sector, reduce the large role of the state in the economy, lower trade barriers that hinder exports, improve the regulatory and business environment, and invest in human capital development. The Government has launched several initiatives to tackle these issues, including commitments to continued fiscal consolidation under the new IMF program, planned privatizations of state-owned enterprises (SOEs), reforms of power distribution companies, and an accelerated business regulatory reform agenda. This edition of the Pakistan Development Update (PDU) underscores the need for structural reforms to unlock opportunities for private capital mobilization for improving Pakistan’s digital infrastructure. There are opportunities to improve the country’s capability to digitally deliver services to its citizens and businesses through the ongoing development of its digital public infrastructure (DPI). To build on progress thus far and address outstanding challenges, targeted legal and regulatory reforms are essential to crowd in private investment and improve access to affordable broadband and digital government services. Better coordination between federal and provincial authorities will also help close the spatial divide in digital connectivity and access.