ISLAMABAD: The World Bank on Tuesday cautioned Pakistan against short-term measures like domestic debt restructuring and attracting one-time investment through a new civil-military initiative, without addressing the country’s ‘big picture issues’ through reforms aimed at improving larger business climate, taxation and human capital.
The “creation of a new institution is no quick fix” to bring investment without improving the taxation system, competitive market conditions and state-owned entities, Martin Raiser, the World Bank’s regional vice president for South Asia, said at a news conference.
He said the government’s objective in creating the Special Investment Facilitation Council (SIFC) might be good and such steps could help once or twice, but it was no solution to Pakistan’s challenges, which could only be addressed by improving the business climate, providing a level playing field and removing distortions and tax exemptions.
Earlier, the International Monetary Fund (IMF) had also advised the government against creating a group of preferred investors and suggested transparency and accountability should be above board, even in SIFC-led investments.
Responding to a question, Mr Raiser also said international experience suggested that domestic debt reprofiling did not always work unless associated with sharp and sustained structural reforms supported by the IMF to reduce the debt burden.
He said when such restructuring was done, the banks could become insolvent, which ultimately affected growth.
This has to be part of the macroeconomic improvement so as to reduce interest rates and therefore such a move should be “carefully considered”.
Najy Benhassine, World Bank’s country director for Paki­stan, said in reply to a question that he hoped his institution could disburse up to $2 billion to the country during the current fiscal year, provided elections were held on time and the present and new governments remain committed to reforms and deliver on promised efforts.