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Election uncertainty may dampen foreign investment in Pakistan: World Bank

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11 months ago

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  • Fiscal vulnerabilities could weakened due to increase in spending.
  • WB says GDP growth to stand at 1.7% during FY24. 
  • Projects GDP to grow 2.4% during next fiscal year.

ISLAMABAD: The World Bank has warned that the uncertainty surrounding elections may hamper foreign investment in South Asian countries including Pakistan while maintaining that the country’s GDP growth projections stand at 1.7% for the ongoing fiscal and 2.4% for the next one, reported The News on Thursday.

“In a number of SAR economies (Bangladesh, Bhutan, India, Maldives, and Pakistan), parliamentary or national assembly elections are scheduled or planned in 2024. The heightened uncertainty around these elections could dampen activity in the private sector, including foreign investment. If combined with political or social unrest and elevated violence, this could further disrupt and weaken economic growth,” it was stated in the Global Economic Report released by the World Bank.

The lender has also warned that countries with weak fiscal positions could further their macro-fiscal vulnerabilities due to an increase in spending ahead of the elections. However, it explained that the implementation of policies to reduce uncertainty and strengthen growth potential post-elections may improve the situation.

On Pakistan’s economic outlook for the ongoing fiscal year, the bank stated it remains subdued with growth to stay at 1.7%. It also foresees monetary policy to remain tight to contain inflation, while fiscal policy is also set to be contractionary, reflecting pressures from high debt-service payments.

Weak confidence stemming from political turmoil will contribute to the slow growth in private demand. As inflationary pressure eases, growth is expected to pick up to 2.4% in FY2024/25.

As poorer households spend more on food, rising food prices would disproportionately affect the poor and the vulnerable, resulting in higher poverty and inequality. 

The risk is particularly high in countries with limited fiscal buffers to mitigate adverse effects, including Nepal and Pakistan, and in countries under major security threats, including Afghanistan. In addition, an increase in food insecurity could be exacerbated by the escalation of the ongoing conflict in the Middle East.

External and fiscal financing needs are elevated in several SAR economies, including Maldives, Pakistan, and Sri Lanka, increasing vulnerabilities to financial market disruptions.

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Irfan Siddiqui meets with the PM and informs him about the Senate performance of the parliamentary party.

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The head of the Senate’s Foreign Affairs Standing Committee and the PML-N’s parliamentary leader paid Prime Minister Muhammad Shehbaz Sharif a visit in Islamabad.

Senator Irfan Siddiqui gave the Prime Minister an update on the Parliamentary Party’s Senate performance.

Additionally, Senator Irfan Siddiqui gave the Prime Minister an update on the Senate Standing Committee on Foreign Affairs’ performance.

He complimented the Prime Minister on his outstanding efforts to bring Pakistan’s economy back on track and meet its economic objectives.

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Business

SIFC Increases Direct Foreign Investment: Investment in the Energy Sector Rises by 120%

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The Special Investment Facilitation Council is intended to help Pakistan’s energy sector attract $585.6 million in direct foreign investment in 2024–2025. The amount invested at the same time previous year was $266.3 million.

This is a notable 120% rise, mostly due to investments in gas exploration, oil, and power. Such expansion indicates heightened investor confidence and emphasizes the development potential in important areas.

The State Bank reports that foreign investment in other vital industries has increased by 48% to $771 million.

This advancement is a blatant testament to SIFC’s efficient investment procedure and quick project execution.

The purpose of the Special Investment Facilitation Council is to establish Pakistan as an investment hub by aggressively promoting regional trade and investment in the energy sector and other critical industries.

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Business

Discos report losses of Rs239 billion.

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When compared to the same period last year, the data indicates that discos have decreased their losses in the first quarter of the current fiscal year.

The distribution businesses recorded losses of Rs239 billion in the first three months of the current fiscal year, a substantial decrease from the Rs308 billion losses sustained during the same period the previous year.

Additionally, the distribution businesses’ rate of recovery has improved. It has increased to 91% in the first quarter of this year from 84% in the same period last year, indicating success in revenue collection.

Regarding circular debt, the Power division observed a notable change. Last year, between July and October, the circular debt grew by Rs301 billion. Nonetheless, this year’s first four months saw a relatively modest increase in circular debt, totaling about Rs11 billion.

These enhancements show promising developments in the electricity sector’s financial health in Pakistan, where initiatives are being made to accelerate recovery rates and slow the expansion of circular debt.

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