research paper on economy of pakistan

Response of Pakistan’s economic growth to macroeconomic variables: an asymmetric analysis

• Research Article
• Published: 23 December 2022
• Volume 30 , pages 36557–36572, ( 2023 )

Cite this article

• Hafiz M. Sohail   ORCID: orcid.org/0000-0002-7885-5549 1 ,
• Mirzat Ullah   ORCID: orcid.org/0000-0002-7715-0352 2 ,
• Kazi Sohag 2 &
• Faheem Ur Rehman   ORCID: orcid.org/0000-0003-1517-0611 3  

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This study examines the impact of several important macroeconomic variables such as quality of education, infrastructure development, foreign direct investment inflow, and green energy transitions on economic growth. We analyzed annual time series data sample for estimation of the above macroeconomic indicators during 1990 to 2020. We use nonlinear auto-regressive distributive lag model (NARDL) approach to detect the short-term and long-term effects of undermentioned macroeconomic variables on economic growth of Pakistan. The results primarily reveal that the quality education, foreign direct investment inflow, and infrastructure development are playing a significant positive role in the economic growth of Pakistan. Similarly, in short term the foreign direct investment inflow, infrastructure, and green energy transition coefficients are significantly positive related to sustainable development goals. However, the education found as unsubstantial as contributive as other variables. Moreover, the Granger causality and structural break estimations are employed to estimate the causal association between the selected parameters and unexpected change over the economy. The estimated outcomes find the unidirectional causality from education and green energy transition towards economic growth, where education is found within relation to infrastructure. Additionally, bidirectional causal relationship is found between FDI and infrastructure towards economic growth which shows that the increase in foreign investment has the potential to boost the economic growth. Finally, all the estimated indexes are considered as important sources towards the economic growth.

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Introduction

The current transition towards green economy is affecting the world economies and dynamics. Given the considerable hydrocarbon dependency, we scrutinize the key aspects among sustainable development goals (SDGs) that have the potential to make remarkable change in the developing economies especially the case of Pakistan. As other developing economies: Pakistan is adopting the United Nations (UN) endorsed campaign of green transition of 17 SDGs. The UN Agenda-2030 for SDGs intends to solve the current environmental challenges of the twenty-first century in the interests of citizens. The sustainable development efforts are considered to contribute to economic growth without affecting the green environment of the society. It is indispensable to address interconnected pillars of economic growth through supportive policies to attain sustainable economic growth. Sustainable development objectives include providing quality education, building resilient infrastructure, promoting of clean energy transition especially the use of natural gases, and inviting foreign investments to boost the domestic economic growth.

The education at both levels industry and society are very important in the way to build green environment and make economic growth. The demand for edification is one of the most critical human assets since it can increase productivity in allocation with resources. In contrast, it has been observed by Seetanah ( 2009 ) that education fosters economic development and increases human livelihoods by boosting the quality of the workforce, promoting democratization, better life, decreasing fertility, and boosting equality. According to the United Nations Research Institute for Social Development, economic sustainability comprises healthy living, education, access to products, and socio-economic achievement (Armeanu et al. 2018 ; Beets 2005 ; Johnston 1998 ; Schwab 2018 ). The current study reveals that improving education in society can contribute to economic growth in long run. Moreover, there is an association between transportation infrastructures and energy consumption by examining the economic growth. To create sustainable environment the study reveals that the economic growth is veiled in creating less CO 2 emission and energy consumption. In adopting the green energy, the study uses the adaptation of natural gas, which is considered as crucial clean energy source as comparison with other petrochemicals such as petroleum and coal. The increase in natural gas consumption is predicted to enhance Pakistan’s environmental quality and allow the country to maintain its economic performance. Apergis and Payne ( 2010a ) examined that natural gas can minimize CO 2 emissions. IEA ( 2016 ) reported the adaptation of natural gas consumption from 2012 to 2030 that use of natural gas in the power sector will rise by 2.2% and in industry can boost by an average of 1.7% per year. It is expected that converting power and industrial sector form petroleum into natural gas the Pakistan can save 17% CO 2 emission and economy can grow with the same ratio (Sadiqa et al. 2022 ).

Achieving targeted economic growth is one of the critical challenges of government policymakers in case of developing countries like Pakistan. The prevailing concern for all economies is to sustain the economy (Shabbir 2013 ). According to UN Agenda-2030 the SDG-8 support the sustained, inclusive, and sustainable economic growth; productive employment; and clean environment for all. According to the World Business Council for Sustainable Development, companies may meet human desires by inventing the modern technologies, improving efficiency, creating jobs, and ensuring that solutions are accessible to a broad range of people (Carree et al. 2007 ). For measuring economic growth, current study has adopted the same proxy used by (I. Khan et al. 2021 ; Omri 2013 ). Yusuf et al. ( 2020 ) documented that most economies aspire to attract foreign direct investment ( FDI ) because of its recognized benefits as a catalyst for economic growth. Likewise, this research looks at the empirical association between FDI and economic growth in Pakistan, as well as the factors that influence FDI into the Pakistani economy.

As a result, this study focused to develop a theoretical and statistical solution to the question: do the goals of the UN Agenda-2030 of SDGs impact the economy of Pakistan? This study aims to develop and test the models to determine the association between education (SDG-4), FDI (SDG-17.3), infrastructure and technology (SDG-9), clean energy (SDG-7), and sustainable economic growth (SDG-8) in Pakistan (Fig.  1 ). This research study examines the impact of sustainable development goal indexes (SDGs) include the levels of quality education, resilient infrastructure, clean energy transition proxied by use of natural gases, and foreign direct investments on domestic economic growth of Pakistan (Fig.  2 ). These SDGs are selected form current stream of United Nations Agenda-2030 of green energy transitions. This paper contributes to existing efforts for economic growth narrative in several ways like introducing new statistical measurement of nonlinear auto-regressive distributed lag (NARDL) model which is considered as most superior to the conventionally used auto-regressive distributed lag (ARDL) model. This model has the potential to predict the effects of the explanatory variable in domain of both positive and negative shocks on the outcome variable (Neog and Yadava 2020 ). Additionally, the existing literature studied toured the impacts of energy consumption on economic growth with the conventional ARDL linear modeling methods which only assessed the impacts of external shocks related to consumption of energy on the nation’s GDP (Sohail et al. 2022 ).

Source : Author’s calculations

Conceptual framework of the study.

Source : Author’s calculations. b Historical trending in the economic growth of Pakistan. Source : Author’s calculations

a Trend in the economic growth of Pakistan with respect to Bangladesh and Iran economies.

In line with the above discussion, this research study aimed several specific goals. First , we assess the economic impact of inclusive and equitable quality education to encourage possibilities for lifelong learning. Second , we assess the impact and enactment of the global partnership to invite more foreign direct investment to home country on economic growth. Third , we analyze the effect of resilient infrastructure, sustainable industrialization, and foster innovation on economic growth. Finally , we determine the effect of affordable, reliable, sustainable, and modern energy on economic growth. This study is different from previous studies in several ways, where we focused on each category of SDG impact on national economy. We mainly focused on the SDGs which are included in UN agenda, where the member developing countries are UN suggestions. Most important, the impact of such SDGs was used in our study, for example, the long-run effect of education on national economy. The government subsidizes and spends more on higher education to produce skill full labors where the impact of such spending is negative on economic growth, which is against the previous research studies and opposing the general theoretical support. This impact is very true to current economic situation of Pakistan. There are several reasons like citizens are getting the stipend and scholarships for higher studies and leave the country. On the other hand, government failed to provide jobs to graduates so skillful labors are contributing negative to economic growth in the long term. Additionally, the FDI inflow into the developing economy has vast substantial impact of economic growth. In this study we used several statistical estimations like VECM and NARDL to find out the enactment of the global partnership on economic growth proxied by FDI inflow.

The remaining manuscript is set as follows: a historical overview of Pakistan’s economy is presented in the “ Overview of Pakistan economy ” section, review of literature is summarized in the “ Literature review ” section, whereas the methodology and empirical results are covered in the “ Methodology and data source ” and “ Empirical analysis ” sections, respectively. Finally, the “ Conclusion and policy implications ” section presents the conclusion and policy implications.

Overview of Pakistan economy

Pakistan stands in developing economy with GDP of $264 billion. In comparison with other geographic economies the Pakistan economy grew up with many challenges and experience serious issues. Pakistan has recurrently experienced economic and financial crises, including rampant inflation, trade deficits, depleted foreign reserves, and currency depreciation. The economy confronted with a mixture of overpopulation, terrorism, bad governance, and low literacy level.

The two most serious threats to the country’s low GDP are the accumulation of rising inflation and a payment crisis triggered by a mixture of global and regional elements (Tehsin et al. 2017 ). Similarly, the pandemic (COVID-19) has exacerbated, and Pakistan’s foreign exchange reserves plummeted to multiyear low (Pakistan 2021 ).

Over a given time period, this secures the difference between a country’s exchange of goods and services, as well as net transactions such as overseas aid. A persistently high deficit may result in a surplus of a country’s currency in the foreign exchange market, reducing the currency’s value. This is one of the reasons why the Pakistani rupee (PKR) has plummeted (Khan et al. 2022 ). To overcome all the issues Pakistan requests to IMF bailout package and, additionally, borrow from other countries like China, Saudi Arabia, and USA. The Pakistan’s economy experienced significant regime changes, during every regime the level of uncertainty changed for the trade effected, and this is the main issue faced to the economy. The volatility behavior of Pakistan economy is divided in four major phases. First was the phase where it is generally agreed that Pakistan had economic progress during the 1960s (Looney 2004 ). However, at the same time the defense spending throughout the late 1960s slowed the country’s economic growth and caused it to stagnate (Looney 1991 ). During 1958–1973, increased defense spending harmed economic growth, particularly during the conflicts with neighbor country in 1965 and 1971 (Looney 1994 ).

The second phase of economic expansion emerged in 1980s, with the most significant annual GDP growth of 10.2% reported in 1980 and a yearly growth rate of 6.1% over 10 years of 6.1% on average (Tehsin et al. 2017 ). Despite this progress in economic development, Pakistan may perhaps be not maintained it until miliarial administration. Similarly, following the previous regime the military acquired the country administration and several structural changes were enabled, accepted globalization, and welcomed international trade and investment; Pakistan’s economy progressed toward sustainable economic growth. This was the era from 2000 to 2007 during which the economy grew at a rapid pace (Amjad and Awais 2016 ). Based on the lessons learned during the miliarial administration, it can be predicted that the social and economic consequences of another effort at economic development will manifest themselves in the structure of extreme right-wing violence in society. Ultimately, due to the worldwide coronavirus outbreak, Pakistan’s GDP growth fell to 1.9% in 2019, down from a decade-high of 5.8% the previous year when the new elected administration took the charge. The economy grew, ranging from 7.0 to 7.5% in the final years of the miliarial administration, primarily due to advances in the recital of the service sector (Looney 2009 ). The final phase could be considered in economy favor to reduce the country’s large budget deficits and excessive public debt caused by the prior newly elected democratic administration have act as poor economic management (Looney 2004 ). According to Looney, the miliarial administration did not adhere to the effective governance indicators set forth by the World Bank (Looney 2004 ). These include political freedoms, the efficiency of government, and anti-corruption (Kaufmann et al. 2011 ).

Literature review

This part includes a detailed assessment of previous work that has been done in context of economic growth, development in education, green energy transition, foreign direct investment, and infrastructure development. This part will assist the readers in fully understanding the bridge and connection between SDGs and the economic growth of Pakistan. The following is a review of the literature on each domain subject.

• Economic growth

In the perspective of economic growth of Pakistan, it has been facing number of challenges like high fiscal deficit and low investment, rising rate of poverty and unemployment, and heavy external and domestic debts. For success of any economy, it depends upon stable, efficient, and active government financial structure. To support the ongoing economic projects, Sohail et al. ( 2022 ) examined that the economy has been facing the lowest growth rate among South Asian countries since 1990. They concluded that the exogenous factors could enhance the current low growth and award a development in economy. Additionally, the economy of Pakistan has been facing a large spillover effect of war on terror, internal instability that is promoted by frenemies and hostile neighbors (Sadiqa et al. 2022 ). Endogenous mishandling of energy crises started from 1990 and which is the result of poor economic management, governance, and institutional framework. Yusuf et al. ( 2020 ) concluded that the economy needs to improve the political stability for promotion of investment form of domestic and foreign investors and suggested the openness to international trade and private foreign investment. It created untenably large lags in policy formulation and implementation (Sohail et al. 2022 ). Nazir et al. ( 2021 ) documented that the manufacturing sector contributed its share in economic growth and played a key role. They examined that Pakistan due to this sector progressed from its status as a low-income to a lower middle-income country. It helps the nation to achieve the objective of poverty reduction. In the current scenario, Pakistan needs to significantly increase foreign direct investments, as well as national saving, to overcome the budgetary issue and to address the domestic and external debt burden.

Education and economic growth

Pakistan’s literacy rate is substantially lower as comparison with other developing countries. The literacy rate is being significantly higher for males with high difference than for females, and for the females, the educational levels are much lower. Sustainable development goal comprises the ensuring of inclusive and quality education and promoting lifelong learning opportunities for all (Seetanah 2009 ). Similarly, Kingdon ( 2007 ) stated that the education quality in Pakistan is different from other developing countries and needs a serious attention; it is concluded that certain economies with a high educational level (for example, Taiwan) also have a thriving economy. Self and Grabowski ( 2004 ) examined the determinants of education on economic development, that the educational attainment is accountable for fluctuations in a financial product. Their study also demonstrated educational levels which are related to each other. Chowdhury ( 2022 ) investigated the internationalization of education on economic growth; the main findings revealed significant disparities between education levels in terms of their effect on economic growth. The tertiary education does not appear to have a causal effect on development. They examined the association between level of education and economic growth and conclude that when the population is separated into groups based on the gender of the individuals then education has a significant causal effect on the nation’s economic growth in the long term. Many other experts have concentrated their efforts on investigating the relationship between education and the economic prosperity of a country, but in developing economies, this is considered as first time to examine the effect of education on economic growth.

Lin ( 2003 ) studied the association of economic growth, education, and technical progress and confirmed the long-run association of parameters. Hassan and Rafaz ( 2017 ) study the association between gender’s education and economic growth in Pakistan. Using OLS regression and data spanning the years 1990 to 2016, the results reveal that increasing female education, female labor force participation, education expenditure, and fertility rate by 1% resulted in a 9.6% rise in Pakistan’s gross domestic product (GDP). Hanif and Arshed ( 2016 ) employed three indices for educational level in the SAARC countries to determine that higher education enrollment has the most significant impact on growth. Saeed and Awan ( 2020 ) attempted that the technical improvement has a significant impact on Pakistan economy and suggested the positive association between research and development and innovations and those discoveries can help to increase the pace of GDP growth. Yasmin et al. ( 2021 ) employed a generalized method of moments (GMM) to investigate the link between economic growth and several factors such as education, poverty, and unemployment in Pakistan. Educational attainment and trade expansion both have a favorable impact on the economy, whereas joblessness has an adverse influence on the determination of economic expansion, according to the conclusions of the research. Despite the fact that each researcher took a distinct strategy to their investigation, the outcomes appear to be comparable. The question is if the connection between educational factors and economic growth in Pakistan has altered over time, and whether there are any other factors that are associated with these variables. As a result, explanation and specificity of the association between education and economic growth may be regarded valuable information. A trend of education is shown by Fig.  3 .

Trend in education including primary, secondary, and higher education (1990–2019).

Foreign direct investment and economic growth

The theoretic basics of the foreign direct investment ( FDI ) to economic growth is founded on the neoclassical and endogenous growth models. Chanegriha et al. ( 2020 ) deliberate that the FDI has an optimistic effect on economic growth by growing investment level. However, in the endogenous growth models the FDI increases total economic growth in host countries by familiarizing new inputs, technologies, and products; augmenting managers and labor skills; and increasing local competition. Ciftci and Durusu-Ciftci ( 2021 ) studied that the FDI inflows for the host countries have several advantages, such as creating new business areas and human capital enhancement, lessening the market power of present firms, being a catalyst for domestic capital stock, and tax revenues in respect to other types of financial capital.

Ahmad et al. ( 2022 ) investigated the Chinese FDI flow into Pakistan. They documented a massive increase after the groundbreaking of Belt and Road Initiative (BRI) and China-Pakistan Economic Corridor (CPEC). According to the Chinese government, investments in Pakistan increased from $695.9 million in 2014 to $1002.9 million in 2020. Similarly, Abdouli and Omri ( 2021 ) conducted an empirical study to investigate the association between FDI and GDP. They suggested that they would have a significant impact on Pakistan’s economic growth. Thereby, FDI provides a number of benefits to the host country, including the formation of new jobs, technical progress, resource optimization, and competitive merchandise. According to these figures, Chinese investment accounted for an average of 43.8 percent of total FDI . Murshed et al. ( 2022 ) claimed that FDI puts stress on local firms to innovate and develop technologically, which may explain why developing countries welcome FDI . With FDI assistance, Pakistan’s economy is poised to close the savings-investment gap. This FDI creates new job opportunities, technology transfer, increased productivity, and contest. Benefits like these encourage developing economies like Pakistan to adopt FDI -friendly policies.

Hamid et al. ( 2022 ) scrutinized the impact of FDI and imports on economic growth; they discovered a dual-directional relationship between output and FDI and imports. The findings support the assertion of output growth caused by FDI and imports. Ulucak and Erdogan ( 2022 ) investigated the ambiguous environmental effects of FDI inflows. They demonstrated the negative environmental consequences of hosting FDI , which indicates that as FDI flows into host countries, environment protection tends to worsen. Similarly, according to Wang et al. ( 2022 ), pollution halo effect highpoints the optimistic environmental significances of FDI . In this respect, these FDI are supposed to be immersed in tidy industries within the host nations, thereby plummeting the possibility of FDI making contributions to augmented CO 2 emissions. Khan et al. ( 2020 ) studied the FDI inflows and CO 2 emission nexus, applied data of BRICS countries from 1986 to 2016, highlighted the harmful environmental effects of FDI inflows, and documented that higher FDI inflows contribute to higher emissions of CO 2 . Furthermore, the country-specific results revealed that, with the exception of Russia, the pollution haven hypothesis holds true for the other BRICS nations. Moreover, Fig.  4 presents the trend of FDI in Pakistan.

Trend in foreign direct index inflow to Pakistan.

Infrastructure and economic growth

The sustainable development goal in UN Agenda-2030 is to create resilient infrastructure, promote inclusive and sustainable industrialization, and inspire innovation. Reliable infrastructure is required to connect supply chains and efficiently move products and services across the borders (Sohail et al., 2021 ). Construction of infrastructure links households throughout urban regions, helps in flow of trading commodities, provide quick access to quality healthcare facilities, and award access to educational opportunities. Infrastructure plays a significant role in connecting markets by transporting products and consumers of an economy (Brons et al. 2014 ). As a result, efficient transportation methods allow contractors to deliver their goods and services to the market on time while also facilitating the movement of people to the most relevant occupations in demand. A good telecommunication infrastructure allows for a rapid flow of information, which improves the country’s overall economic efficiency (Rehman et al. 2022 ; Schwab 2018 ). Because of their connection, air and road transportation stimulate a broader range of activities. The authors also provided proof for a significant optimistic reaction of passenger-kilometer due to favorable change in earning (Rehman and Sohag 2022 ; Marazzo et al. 2010 ). It has been estimated that an increase of 1% in air passenger traffic results in a rise of 0.943% in the gross domestic product (Hu et al. 2015 ). Figure  5 shows the trends of infrastructure in Pakistan.

Trend in infrastructure including rail lines, container, air, and rail passengers (1985–2019).

Natural gas consumption and economic growth

The purpose to ensure access to affordable, reliable, sustainable, and modern energy for all depicts that sustainable goal is included in UN Agenda-2030. Natural gas is considered a reliable source of green energy transition. In this research study we are considering that the natural gas is a significant energy supply for almost every economy of the country, more specifically the developing country like Pakistan. Natural gas is used to generate the country’s total national output. Additionally, it is a cleaner and environmentally friendly resource of energy in comparison to other petrochemical or coal. Increasing the natural gas consumption level in Pakistan is expected to advance the country’s environmental quality, and will allow the government to maintain its economic performance (Sohail et al. 2022 ). One effective option for achieving energy structure optimization is transitioning from coal to low-carbon energy sources (Li et al. 2019b ). Compared to coal and oil, natural gas usage produces much fewer CO 2 emissions per unit of energy (Solarin and Shahbaz 2015 ).

Natural gas has been considered as a low-carbon and environmentally friendly among all other energy sources; it can significantly reduce air pollution (Xiao et al. 2016 ). Increased NGC can contribute to the achievement of the twin dividend, i.e., economic growth and emission reduction (Feng et al. 2015 ). Because natural gas is one of the energy input variables at the micro-level, the price of natural gas will directly influence the use and production of all industries, particularly the secondary industry, which is one of the most energy-intensive industries. Promotion and exploitation of natural gas as an industrial material in factories and as a household commodity could significantly impact the way people live and produce, especially when compared to other alternative energy sources, remarkably price, and accessibility. Much academic research has been undertaken on the causality relationship between NGC and economic growth, most of which have been conducted at the national level and compared the results of other countries. For example, the research from 67 nations over the period 1992–2005 revealed that NGC and economic growth were linked in a two-way causal manner both in the short and long terms (Apergis and Payne 2010b ). Among G7 member countries, there were three types of causality between NGC and economic growth (unidirectional causality, reverse causality, and bidirectional causality) (Apergis and Payne 2010b ), the first being the most common (Ozturk and Al-Mulali 2015 ). The evidence from the Gulf Cooperation Countries throughout the period 1980–2012 demonstrated that NGC was beneficial to long-term economic growth. Depending on the outcomes of their research, different experts have come to different conclusions about the connection between natural gas use and economic development.

As a result, while numerous studies have established that NGC has a favorable effect on economic growth (Ozturk and Al-Mulali 2015 ), others have claimed that economic growth has a detrimental impact on NGC (Sari et al. 2008 ). Furthermore, there was a mismatch among regions regarding the association between NGC and economic growth (Fatai et al. 2004 ). In this aspect, the association between NGC and economic growth was statistically insignificant in Australia and New Zealand. According to the findings from different OPEC member countries, there were growth, conservation, and neutrality correlations between NGC and economic development, in other OPEC member countries. It was shown that the association between NGC and economic growth differed significantly between China and Japan. In China, there was no evidence of indirect causality, whereas in Japan, there was evidence of two-way causality (Sari et al. 2008 ). Finally, trend in natural gas consumption in Pakistan is shown in Fig.  6 .

Source: Author’s calculations

Trend in natural gas consumption.

Methodology and data source

To estimate the growing stream of Pakistan economy, in the consideration of UN Agenda-2030 of green transition SDGs, we analyze that a long period contains three-decade annual time series data for the SDG’s indexes from period 1990 to 2020. Further, we apply the principal component analysis and vector error correction model vector auto-regression method advanced by Antonakakis and Gabauer ( 2017 ). VECM econometric techniques are used to investigate the statistical significance of considered SDG’s indexes to study the effect both in long and short terms. From the UN Agenda-2030 of green transition SDGs, we are considering the five most vulnerable variables along with indexes to examine the affect in most effective way. These indexes are education index ( EDI ), foreign direct investment ( FDI ), infrastructure index ( INFRI ), and natural gas consumption ( NGC ). For batter examination we are considering the GDP per capita as the proxy of economic growth ( EG ).

Estimation process

We scrutinized the influence of four SDGs on economic growth along with the indexes. Hence, a statistical tool called principal component analysis (PCA) can minimize the number of variables in a multivariate data set. The foremost benefit of this approach is that it permits the variance to keep the input data’s maximum informative value intact while simultaneously minimizing the dimensions (Tripathi and Singal 2019 ). PCA is a well-accepted approach for selecting independent variables and removing duplicate or strongly correlated parameters commonly used in economic estimations. Using the PCA estimations this method to identify the variation within an extensive collection of associated variables are proposed by (Jolliffe 1972 ).

However, the empirical investigation starts with determining the sequence of the variables’ integration (Fig.  7 ). This sequence is critical because ARDL methods can accept variables incorporated at level or at first difference, but not at second difference. This model has a single disadvantage: it cannot be used if the parameters are integrated at the I (2) (Ibrahim 2015 ).

Estimation strategy.

Vector error correction model

Here is the long-run association among the series I (1); it is, therefore, the VECM approach that estimates the long-run and short-run association among the selected variables (Tran 2018 ). Additionally, for better representation of causal association between the time series variables this study used Granger causality techniques (Rossi and Wang 2019 ). This current study analyzes the causal association between selected indexes of SDGs such as education (EDI), foreign direct investment (FDI), infrastructure (INFRI), and green energy transition (NGC) and check the impact on economic growth (EG).

Nonlinear cointegration results

PESARAN et al. ( 2001 ) examined the cointegration analysis to deliver the proof of a linear relation between dependent variables. The NARDL is a nonlinear stretched form of usual ARDL model to study the effect of both short run and long run. For the conceivable asymmetric effects, this model is practical for investigation in the short and the long run. Similarly, the present study employs the estimation of nonlinear auto-regressive distributive lag (NARDL) model developed for the first time by Shin et al. ( 2014 ). By using this modern statistical model the presence of an association between levels of education, infrastructure, FDI inflow, and natural gas consumptions in Pakistan is investigated. Using NARDL in this study have several advantages over other techniques like it reduces the characteristic supposition in the cointegration analysis that all selected variables necessarily be integrated of the same order with excluding the second difference I (2) variables. Additionally, as studied by Li et al. ( 2019a ), it examines the potential cointegration, so that it evades neglecting any association which is not evident in an existing established linear setting. Similarly, Economou ( 2019 ) documented that the NARDL estimator allows to discriminate the existence of linear cointegration, nonlinear cointegration, and lack of cointegration. The present study is using the NARDL model that covers the optimistic and pessimistic partial sums and also the short- and long-run effects on economic growth. Furthermore, as Pakistan have witnessed sever crisis in 1998, 2008, and 2019, structural-break test is very vital for the current study. The study utilized unit root test against the alternative of trend stationary process with a structural breakpoint both in intercept and slope is based on the analysis. Thus, using an error correction model the NARDL model studies the resultant equations for

where EG t is the economic growth in Pakistan in year t ; EDI t shows the education index in year t ; FDI t presents the foreign direct investment inflow in year t ; INFRI t stands for the infrastructure index in year t ; NGC t shows the natural gas consumption in year t ; \({\hat{e} }_{t-1}\) shows the error correction term; α 1 , α ij \(\left(i\right)\) , and β 1 are the parameters; and \({\varepsilon }_{\mathrm{log}egit},{\varepsilon }_{\mathrm{log}ediit},{\varepsilon }_{\mathrm{log}fdiit},{\varepsilon }_{\mathrm{log}infriit}, \mathrm{and }{\varepsilon }_{\mathrm{log}ngcit}\) are the white noise disturbance terms that may be correlated with each other. The rank of cointegration in VECM designates the total cointegrating vector. For instance, the number of rank (2) specifies that the linear combination of two nonstationary repressor variables will become stationary. A significant negative sign of the e t  − 1, also called the error correction model (ECM) parameter, displays that any variation in the short-run association between the independent variable and dependent variable will set up a significant long-run association between them.

Empirical analysis

This study used the augmented Dickey Fuller (ADF) estimation proposed by Dickey and Fuller ( 1979 ) and PP (Phillips and Perron 1988 ) tests for conformation of integration level among the selected variables; the results are presented in Table 1 . The outcome shows that all the other variables are integrated at level I (1). The exact order of integration level guides to apply the VECM estimation technique (Pradhan and Bagchi 2013 ). In above econometric equation we estimate the structural break to estimate an unexpected economic change over the study time frame in the parameters of regression model; such estimation enables us to measure the unreliability and forecasting errors of the estimation model used in our study. The empirical results of structural break-ZA are shown in Table 2 . The results show that the structural breaks, i.e., 2003, 2005, 2007, 2008, 2009, 2010, 2012, and 2013, are founded in the selected variables such as EG , EDI , FDI , INFRI , and NGC . Most of the breaks are started from 2003 to 2012. This break may happen due to financial crisis shocks of Pakistan.

Prior to the application of Johansen cointegration test, it is imperative to confirm the long-run association among the selected parameters; we have to select the lag order by utilizing the VAR approach for I (1) variables (Nielsen 2001 ). The number of lag selection criteria has been applied in previous studies such as Akaike Information Criterion, Hannan-Quinn Information Criterion, Modified Ranking LR test statistics, Schwartz Information Criterion, and Final Prediction Error. In Table 3 , many tests confirm a (1) lag length.

At the moment, the cointegration test is used to determine whether there are any long-run equilibrium relationships between the four variables EDI , FDI , INFRI and NGC and economic growth. This employs the maximum likelihood ratio test and examines two test statistics trace statistics and leading eigenvalue statistics. The result of the Johansen cointegration rank test is shown in Table 4 , which indicates that there are two cointegrating vectors at 5% levels of significance (i.e., the null hypothesis of no cointegration is forbidden for a rank of 0 and less than or equal to 2). This indicates that there is a long-run association between the four variables. The favorable results in Table 4 require the modeling of VECM and not a vector auto-regressive (VAR) model as stated in the model selection process.

In Table 5 , both long-term and short-term coefficients were obtained through the VECM. The long-term coefficients of EDI , FDI , INFRI , and NGC are statically significant. Additionally, the study established that the education index has a favorable effect on economic growth in nine remittance-receiving countries. At a 1% significance level, this optimistic effect of education on economic development is highly noteworthy. The coefficient of EDI implies that increasing the EDI by 1% increases economic growth by 0.08 percent. Our results are the same as the recent study on nine selected remittance-receiving countries exposed (Zaman et al. 2021 ). In comparison, other studies showed that increasing educational levels boosts economic growth (Habibi and Zabardast 2020 ; Hanushek and Woessmann 2020 ; Kousar et al. 2020 ). Likewise, numerous studies have also demonstrated a beneficial correlation between education spending and economic growth (Glewwe et al. 2014 ; Jalil and Idrees 2013 ). These research findings corroborate our findings, indicating the existence of a noteworthy long-term optimistic link between economic expansion and education.

The FDI coefficient affirms that a 1% augmentation in FDI will boost economic growth by 0.504 percent. A 1-percent drop in FDI will conversely influence economic growth with the same quantity. Modern studies examining the relation between FDI influx and economic growth indicated that FDI inflow increases economic growth (e Ali et al. 2021 ). Similarly, other studies reported that FDI increased economic progress in the long run (Saleem and Shabbir 2020 ; Tiwari and Mutascu 2011 ).

In addition, the VECM model’s long-run fallout shows that INFRI (infrastructure index) also leads to an essential positive connection in the direction of economic growth at a 1% significance level. The coefficient of INFRI increases by 1%; economic growth will also augment by 0.757, respectively. The outcomes logically aligned with Mohanty and Bhanumurthy ( 2019 ) and C. Wang et al. ( 2020 ) showed a significant positive association between economic growth and infrastructure. Another study conducted in India also authenticated our results that increasing infrastructure enhances economic growth (Mohanty and Bhanumurthy 2019 ; Chakamera and Alagidede 2018 ).

Finally, the selected VECM model shows that NGC also helpfully manipulates the economic growth in the chosen country. As NGC is raised by 1%, it boosts economic enlargement by 0.460%, while declining NGC by 1% will move down economic growth with the identical percent in the case of Pakistan. This positive bond between NGC and economic expansion is highly noteworthy at a 1% significance level. Our consequences are associated with the recent study by Sohail et al. ( 2022 ) and previous studies (Apergis and Payne 2010b ; Shahbaz et al. 2013 ; Solarin and Ozturk 2016 ) showing that economic growth can be improved with the increase of NGC .

In the second part of Table 6 , the error correction term ( CointEq1 , CointEq2 ) is significant. It has a negative sign, which means that the series are cointegrated and go together toward long-term equilibrium (Mahadevan and Asafu-Adjaye 2007 ). The negative response is required for balancing the EG series in the long term. As the error correction term is adverse and significant, we have causality in at least one direction. The short-run consequences of the nominated VECM model display that FDI inflow has an essential positive connection with economic growth, indicating that a 1% increase in FDI inflow will enhance economic growth by 0.315 percent in the short run.

During the short-run term, EDI has a significant pessimistic association with economic growth, which means that increasing education by 1% reduces economic expansion by 0.460 percent. INFRI has a considerable positive link with economic increase in the short run. In the near run, a 1% increase in INFRI boosts economic growth by 0.149 percent and vice versa. NGC demonstrated a substantial negative link with economic intensification in the short run, indicating that a 1% increase in NGC causes economic growth to decelerate by 0.321 percent. The R 2 value is close to 1 ( R 2  = 0.835). It can be said that the interpretation is consistent. This result supports the result obtained from the cointegration test. Therefore, the comments made for this equation are consistent as well.

The advance methodology was introduced by Shin et al. ( 2014 ) to examine the time series data for nonlinear and significant relationship. The results from NARDL are estimated in Table 7 , where we follow the estimation from Shin et al. ( 2014 ). We examined that there is cointegrated and significant association between economic growth and education, natural gas, and infrastructure. Additionally, we extend the model to check the short-run and long-run asymmetries. The level of significance is examined at every model from 1 to 3. In this study we employed the structural break to estimate an unexpected economic change throughout in our study timeline. In line with this, we have proposed our estimation as basic model for economic growth ( EG ), model 2 represents the secondary economic growth ( EG-S ), model 3 the primary growth ( EG-P ), and model 4 indicates the tertiary economic growth ( EG-T ) for making such supposition we follow (Shin et al. 2014 ). Additionally, the economic growth is based on cointegration consequences and VECM is organized to recognize the path of causality. The results from short-run NARDL represent that education and infrastructure have no effect on secondary and tertiary economic growth ( EG-S ; EG-T ). However, in the long run the education has significant and positive impact over primary economic growth ( EG-P ). Similarly, in all models the FDI has vital role in determination of economic growth at every level. Moreover, the consumption of natural gas impacts in the long term and in the long run.

The consequences of Granger causality are presented in Table 8 . The outcome shows the unidirectional causality from EDI to economic growth ( EDI  ≥  EG ), natural gas to economic growth ( NGC  ≥  GCF ), and EDI to infrastructure ( EDI  ≥  INFRI ).

Bidirectional causality is found between economic growth and FDI ( EG  < = >  FDI ) and economic growth and infrastructure ( EG  < = >  INFRI ). Bidirectional causality implies that when one parameter is increased, the other parameter also increases. When the parameters are exchanged, the parameters reinforce one another and become self-reinforcing. As a result, the policymaker would have an easier time dealing with this circumstance (Kónya 2006 ). However, if this is not the case, the study must incorporate more variables, and policy formation becomes more complicated (Riman and Akpan 2010 ). In summary, EDI has a noteworthy consequence on economic growth in Pakistan, owing to its bidirectional causation.

To check the result health of this study, we also report some problem-solving tests (Sohail et al. 2022 ) such as LM test, White test, and Jarque–Bera test. The results are provided in Table 9 and confirmed the model’s strength on the relationship among EDI , FDI , INFRI , NGC , and Pakistan economy.

Conclusion and policy implications

In adaptation of green energy transition and responding to the United Nation Agenda-2030 of sustainable development goal initiation, this research study focused with the impact of sustainable development goals (SDGs) on economic growth of Pakistan. More specifically, we examined the association of several important SDGs on economic growth with regards to previously missing links of sustainable economic development. Interestingly, this study is considering several new dimensions through the influence of SDGs: firstly the education (SDG-4) which is found in opposing to the theoretical approaches, secondly the foreign direct investment (SDG-17) which is found to more contributive to national economy, thirdly infrastructure and technological development (SDG-9) which is found as an important factor to boost the economy, and lastly the clean and green energy of increasing usage of natural gas (SDG-7) on the economy of Pakistan. Specifically, this research study provides help to the policymakers to overcome several permanent issues faced to the economy like the authorities should review the current policies regarding equitable quality education and lifelong learning opportunities to make it more contributive to the economic growth. Additionally , the economy needs more friendly policies to attract more FID inflow. Moreover , the policymakers should provide attention over the existing infrastructure to make it more sustainable business environment for industrialization and foster innovation. Finally , the usage of natural gas is considered more affordable and sustainable environmentally friendly in account of national economy.

We examined the impact several substantial SDGs that has potential to influence the economic for long time period historical data starting from 1990 to 2020. The structural break estimation indicates that there is presence of unexpected growth in several years. In line with this, we used the VECM and NARDL estimation techniques, where we found that the long-term coefficients of education, FDI inflow, and usage of natural gas impact the economy. We determined that FDI inflow and infrastructure are the most potent goals for Pakistan. Similarly, usage of natural gas and education are found contributions to economic growth. The consequences of asymmetric probing are stimulating, which confirmed the mi x outcomes regarding short-term and long-term asymmetries. The short-run and long-run results obtained from NARDL are significant and interesting in the case of developing economy. The government needed to motivate more FDI inflow to improve the infrastructure, and shell also improves education system at different level. Similarly, the adaptation of natural gas is creating a favorable environment. Collectively with the finding of four SDGs, all indicators are essential.

Recommendation and policy implications

The authorities need to imply more appealing policies to attract more foreign investment inflow. The existing policies related to quality education especially in the long term need to be revised to obtain the projected goals. The infrastructure that builds with aim of sustainable development can provide gateway to expansion for business operations. While the usage of natural gas is deemed as more clean energy source in comparison to oil and coal, the production level is to be increased, which could result in increasing of economic growth. This study can be extended to examine the relationship among sustainable development goals by analyzing the influence of other SDGs towards economic growth for other developing economies with fresh date data set.

Availability of data and materials

The data sets used during the current study are available from the corresponding author on reasonable request.

Ethical approval.

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H. M. S. conceptualized, conducted the econometric analysis, and write of chapter introduction. M. Z. U. conceptualized, conducted the econometric analysis, and conduct overall study, with writing of conclusions and recommendations. K. S. reviewed the literature, discussed the findings, and edited the entire draft. F. U. R. supervised the entire study and drafting.

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Sohail, H.M., Ullah, M., Sohag, K. et al. Response of Pakistan’s economic growth to macroeconomic variables: an asymmetric analysis. Environ Sci Pollut Res 30 , 36557–36572 (2023). https://doi.org/10.1007/s11356-022-24677-z

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The World Bank In Pakistan

Pakistan has important strategic endowments and development potential. The increasing proportion of Pakistan’s youth provides the country with a potential demographic dividend and a challenge to provide adequate services and employment.

Poverty reduction has slowed amid recent shocks, as economic growth has remained volatile and slow. Pakistan made significant progress towards reducing poverty between 2001 and 2018 with the expansion of off-farm economic opportunities and increased inflow of remittances. However, rapid poverty reduction has not fully translated into improved socio-economic conditions, as human capital outcomes have remained poor, with high levels of stunting at 38 percent and learning poverty at 78 percent. Critical constraints, including persistent fiscal and current account deficits, protectionist trade policies, unproductive agriculture, a difficult business environment, a heavy state presence in the economy, and a financially unsustainable energy sector, have remained unaddressed, leading to slow and volatile growth. Progress with poverty reduction has recently slowed amid macroeconomic instability, the COVID-19 pandemic, and the catastrophic 2022 floods. The estimated lower-middle income poverty rate is 40.1 percent (US$3.65/day 2017 PPP) for the year 2023-24, virtually the same as the poverty rate in 2018, but with 7 million more Pakistanis living below the poverty line.

Pakistan experienced heavy monsoon rains in 2022 leading to catastrophic and unprecedented flooding with enormous human and economic impacts. Roughly 33 million people were impacted, and many permanently displaced. More than 13,000 kilometers of roads were destroyed, 2.2 million houses damaged, around 3.8 million hectares of crops were flooded, and an estimated 1.2 million livestock were killed. Limited access to input and output markets and temporary disruptions to supply chains subsequently drove up food prices and added to existing price pressures resulting from reduced agricultural yields and the global rise of food prices. The Government’s Post-Disaster Needs Assessment estimated that the need for rehabilitation and reconstruction is at US$16.3 billion.

Pakistan has made recent progress towards macroeconomic stabilization, but risks remain extremely high and faster growth will require substantial reform. Real GDP growth contracted by 0.2 percent y-o-y in fiscal year FY23, after growing by 6.2 percent in FY22 and 5.8 percent in FY21. Accumulated economic imbalances, including high fiscal deficits and increasing debt, depleted Pakistan’s policy buffers resulting in high vulnerability to the catastrophic floods, high world commodity prices, and tight global financing conditions. Repeated delays in implementing the International Monetary Fund (IMF) Extended Fund Facility (EFF) program and the associated decline in external financing inflows saw foreign reserves fall to critically low levels, amid high inflation and sharp currency depreciation. Following the expiry of the incomplete EFF program, a nine-month Stand-By Arrangement (SBA) was approved by the IMF, with staff level agreement reached on its final review in March 2024. Under the SBA, exchange rate flexibility was restored, import controls were eased with some recovery in foreign exchange reserves and economic growth, and new measures were introduced to contain the FY24 fiscal deficit. Nonetheless, risks remain high. Short-term stability depends on remaining on track with the SBA, continued fiscal restraint, and new external financing inflows. Robust economic recovery over the medium term will require the steadfast implementation of much broader fiscal and economic reforms.

Economic activity is expected to remain subdued, with real GDP growth estimated at 1.8 percent in FY24, reflecting continued tight macroeconomic policy, import controls, high inflation, and continued policy uncertainty. Output growth is expected to increase to around 2.5 percent over FY25-26, remaining below potential. Poverty reduction is projected to stall with the poverty rate at around 40 percent in the medium term, owing to weak growth, limited increase in real labor incomes, and persistently high food and energy inflation. Inflation is projected to remain elevated at 26.0 percent in FY24 due to higher domestic energy prices, with little respite for poor and vulnerable households with depleted savings and lower real incomes. With high base effects and lower projected global commodity prices, inflation is expected to moderate over the medium-term. With continued import controls, the CAD is expected to remain low at 0.7 percent of GDP in FY24 and to further narrow to 0.6 percent of GDP in FY25 and FY26. The fiscal deficit is projected to widen to 8.0 percent of GDP due to higher interest payments but gradually decline as fiscal consolidation takes hold and interest payments fall over time.

The Government continues to face a challenging macroeconomic environment while maintaining progress towards macroeconomic stabilization and critical structural reforms. Significant downside risks include: i) policy uncertainty, which may undermine a coherent and timely policy response; ii) worsening external conditions, including unforeseen increases in global commodity prices and interest rates; and iii) risks associated with large domestic and external financing needs, especially in the context banking sector liquidity constraints. To manage these risks, it will be critical to adhere to sound overall economic management and buttress market sentiment, including through articulating and effectively implementing a clear strategy for economic recovery; constraining fiscal expenditures to the extent possible and carefully targeting any new expenditures; maintaining a tight monetary stance and flexible exchange rate; and remaining on-track with critical structural reforms, including those in the energy sector.

Last Updated: Apr 02, 2024

The  Country Partnership Strategy  (CPS) for Pakistan for FY2015-20 is structured to help the country tackle the most difficult—but potentially transformational—areas to reach the twin goals of poverty reduction and shared prosperity.

The Pakistan team continues to engage with stakeholders on the next Country Partnership Framework (CPF). The CPF will draw from several analytical works, including Pakistan Systematic Country Diagnostic: Leveling the Playing Field , and the recently published Country Climate Development Report and Country Economic Memorandum .

The four results areas of the current CPS are:

Transforming the energy sector:  WBG interventions are supporting improved performance of the energy sector by supporting reforms and investments in the power sector to reduce load shedding, expand low-cost generation supply, improve transmission, improve governance and cut losses.

Supporting private sector development:  A mix of budget support, investments and analytical work supports improvements in Pakistan’s investment climate, in overall competitiveness, agricultural markets and productivity, and skills development. 

Reaching out to the underserved, neglected, and poor:  Investments support financial inclusion, micro, small and medium enterprises (MSMEs), women and youth (including through enrollment outcomes), fragile provinces/regions and poorer districts, social protection, and resilience and adaptation to the impact of climate change.

Accelerating improvements in service delivery:  At the federal and provincial levels the Bank supports increasing revenues to fund services and setting more ambitious stretch targets for areas that are not producing change fast enough (especially education and health). At a provincial level, this involves support to better service delivery in cities.

Cross cutting themes for the program include women’s economic empowerment, climate change and resilience, and regional economic connectivity.The WBG has fourth-largest portfolio of $14.7 billion in Pakistan ($10.7bn IDA, $3.8bn IBRD, $0.2mn in Trust funds and co-financings). The portfolio is supporting reforms and investments to strengthen institutions, particularly in fiscal management and human development. Partnerships are being strengthened at provincial levels, focusing on multi-sectoral initiatives in areas such as children's nutrition, education and skills, irrigated agriculture, tourism, disaster risk management, and urban development. Clean energy, and social/financial inclusion, both remain major priorities.

ENHANCING DISASTER RESILIENCE

Being one of the most vulnerable countries to climate change Pakistan is recurrently affected by catastrophes, including the unprecedented 2022 floods which affected an estimated 33 million people and resulted in US$14.9 billion in damages and US$15.2 billion in economic losses . Pakistan’s economy continues to suffer chronic strain from prevailing and likely future threats of hazards. Since the 2005 Pakistan earthquake, which led to nearly 73,000 deaths and caused damages to over 570,000 houses, the Bank has been supporting the Government of Pakistan in shifting to an anticipatory risk management approach. Initially, the Bank provided technical assistance to the government to highlight physical and fiscal risks from hazards, including risk assessments of federal and provincial capitals. In parallel, the Bank also used grant resources to build the capacity of Provincial Disaster Management Authority of Balochistan.

Following the floods of 2014, at the request of Government of Pakistan, the World Bank prepared the US$125 million IDA-funded Disaster and Climate Resilience Improvement Project (DCRIP) to support the restoration of flood protection infrastructure and strengthen government capacity to manage disasters and climate variability in Punjab. The project was successfully concluded in November 2021,achieving its intended development objectives and surpassing the targets for several key results indicators. DCRIP directly benefitted more than 8 million people, half of which are women. The project also repurposed US$7 million to support the Government of Punjab in the pandemic emergency response through procurement of personal protection and healthcare equipment.

In 2016, the Bank also prepared and delivered the US$100 million IDA-funded  Sindh Resilience Project  (SRP) to mitigate flood and drought risks in selected areas, and strengthen Government of Sindh's capacity to manage natural disasters. About 5.75 million people across the province have benefitted from project interventions till date. The drought mitigation component of the project, comprising construction of small groundwater recharge dams, has already started generating strong development impacts for the target communities. In 2021, the Bank approved an additional financing of US$200 million to scale up the small groundwater recharge dams component and set up an emergency rescue service for Sindh.

The Bank has also prepared and delivered the US$188 million IDA-funded Pakistan Hydromet and Climate Services Project which aims to strengthen Pakistan’s public-sector delivery of reliable and timely hydro-meteorological services and enhance community resilience to shocks. The Contingent Emergency Response Component (CERC) was activated under this project to disburse US$150 million in response to the 2022 floods to provide cash assistance to 1.3 million flood affected families.

Furthermore, as part of comprehensive emergency response and rehabilitation support for 2022 floods, the Bank delivered two emergency projects for the province of Sindh, which was disproportionately affected by the catastrophe. The US$500 million IDA-funded Sindh Flood Emergency Rehabilitation Project aims to rehabilitate damaged infrastructure and provide short-term livelihood opportunities through cash-for-work in selected areas of Sindh affected by the 2022 floods. The project will also strengthen the capacity of the Government of Sindh to respond to the impacts of climate change and natural hazards through expansion of the Sindh Emergency Rescue Service (Rescue 1122) and enhancing the preparedness of relevant line departments. The Project is expected to benefit 2 million people through rehabilitated infrastructure while short term livelihood support will be provided to 100,000 households.

Similarly, the IDA-funded US$500 million Sindh Flood Emergency Housing Reconstruction Project aims to deliver beneficiary-driven, multi-hazard resilient reconstruction of core housing units damaged or destroyed in the floods of 2022 in selected districts of Sindh. The Project will support the provision of an estimated 350,000 housing subsidy cash grants and strengthen the capacity of the Government of Sindh by providing technical assistance for the overall housing reconstruction program.

The flood emergency response projects have made satisfactory progress till date. US$ 160 million has been utilized for infrastructure rehabilitation, benefitting more than 3 million people, and about US$100 million has been committed for tranche-based cash grants for housing support to 160,000 beneficiaries.  Efforts are ongoing to ensure the inclusion of eligible beneficiaries and putting emphasis on infrastructure resilience in design standards, which represent important steps towards enhancing overall resilience and building back better.

The Bank has also launched the Country Climate and Development Report (CCDR) for Pakistan. The Pakistan CCDR provides analyses and policy recommendations on harmonizing efforts to achieve further economic growth and lower poverty rates, on the one hand, with the pursuit of a climate-resilient, low-carbon, and equitable development path, on the other. In light of the devastating 2022 heatwaves and floods and the country’s vulnerability profile, the CCDR strongly emphasizes the need to build long-term resilience. Further, it explores pathways for Pakistan to achieve deep decarbonization by 2050, and eventually reach net-zero emissions by 2070 without undermining its development ambitions.

Pakistan has made progress in mainstreaming the Sustainable Development Goals (SDGs) in national policies and strategies, however, there is a slow progress in improving health outcomes. According to the maternal mortality survey in 2019 [1], the country’s maternal mortality ratio  was 186 deaths per 100,000 live births down from 276/100,000 live births in 2006-07. Large gaps exist across provinces with Sindh and Balochistan having twice the number of maternal deaths as compared to the national average. The country also has one of the highest infant and under-5 mortalities in the region (62 and 74 deaths per 1,000 live births, respectively). Twenty-two percent of the children born have low birth weight with variations across provinces.

On average, access to quality reproductive, maternal, newborn, child, and adolescent health with nutrition services in Pakistan is inadequate, with regional disparities. About 49 percent [2] of pregnant women do not receive the recommended four or more anti-natal care (ANC) visits essential for a safe and healthy pregnancy outcome. With 33.8 percent of births outside of health facilities, the risk of maternal and infant mortality and morbidity is high. 42 percent of women of reproductive age in Pakistan have anemia due to poor nutrition. At 3.6 births per woman [3], Pakistan’s fertility rate is still relatively high, and except for Punjab, adolescent fertility has increased, and modern contraceptive prevalence rate (mCPR) has been low in the last decade at 25 percent. High fertility rate and teenage pregnancies contribute to poor maternal and child health outcomes which pose risks of death and illness.  Poor health affects all facets of women’s lives including delayed development milestones, education, learning skills and gainfully participating in the labor force.

Stunting rates for children under age 5 have dropped from 45% to 40.2% from 2013 to 2018 [4]. However, it is still high and large disparities exist among provinces. This prevalence varies from 36.4% in Punjab to 46.6% in Balochistan. The average annual rate of reduction since the last 2018 National Nutrition Survey has been estimated at only 0.5 percent, which is frighteningly slow to reach the national targets. Although the situation is worse in rural and poor households, more than 20 percent of under-5 children in the wealthiest income quintile are also stunted, meaning poverty is not the only driver of stunting.

Immunization coverage for children aged 12-23 months, increased considerably over the past 8-9 years from 54% in 2013 to 77% in 2022. In Punjab 89.5% of children are fully immunized while in Khyber Pakhtunkhwa, Sindh and Balochistan 60.5%, 68%, and 37.9% are respectively fully vaccinated [5].

The World Bank has been supporting the health sector in Pakistan through national and provincial projects. The “National Health Support Program”, approved in Fiscal Year 2023, supports the strengthening of equitable delivery and quality of essential health services at the primary level and the “Sindh Integrated Health and Population Project”, approved in Fiscal Year 2023, supports to improve quality health services in selected areas and restore and rehabilitate healthcare services impacted by floods. The “Punjab Family Planning Program” is aimed to improve modern contraceptive prevalence rate (mCPR) while simultaneously tackling the knowledge and cultural barriers that hinder access to family planning services in the province. Provincial “Human Capital Investment projects” are being implemented in Balochistan, Punjab and Khyber Pakhtunkhwa with the aim to improve utilization of quality health targeted and social services to the poor and vulnerable population.

The World Bank also invests in analytical work through “Programmatic Advisory Services and Analytics (PASA)”, aiming to generate evidence for reforms and provide technical support to the federal and provincial governments in implementing Universal Health Coverage in Pakistan. Additionally, the Bank is working with the Government of Pakistan, through analytics to build capacity of the country stakeholders of the human and animal sectors on health emergency preparedness and response from a one-health perspective.  The Bank is also developing thorough and comprehensive analyses on nutrition that will contribute to the development of a nation-wide program to accelerate stunting reduction in under-five children in pursuit of accumulating human capital in Pakistan.

Sources: [1] Pakistan Maternal Mortality Survey 2019; [2] Universal Health Coverage Index 2023; [3] Demographic and Health Survey 2018; [4] National Nutrition Survey 2018; [5] Third-Party Verification Immunization Coverage Survey Round Two 2022.

Actions to Strengthen Performance for Inclusive and Response Education (ASPIRE) is a 5-year US$200 million program that became effective in August 2020. The program is aimed at enhanced targeting of COVID-19 education response, generating improved learning opportunities for out-of-school children (OOSC) and at-risk students, and enabling stronger federal-provincial coordination and management. To date, the Ministry of Federal Education and Professional Training (MoFEPT) and the provincial education departments have achieved four Disbursement-Linked Results (DLR): adoption of National School Health and Safety Protocols, approval of National Education Response and Resilience Plan, provision of distance learning kits to 50,000 students across the country, and provision of hygiene and cleaning kits to 20,000 public schools nationwide. The activities planned in in FY23 mostly focused on construction and rehabilitation, communication campaigns, teachers training, multi-modal programs, and specific intervention related to Out of School Children (OOSC). The ASPIRE program has also been successful at leveraging the Inter-Provincial Education Ministerial Conference (IPEMC) and the Technical Steering Committee (TSC) platforms for improved coordination between the Federal and Provincial Education Departments.

Pandemic Response Effectiveness in Pakistan project (PREP) , initiated in April 2020, was closed in June 2023. Different donor organizations extended their support in the form of grants and loans to overcome the pandemic situation all over the world, especially to support the education sector. PREP was a USD187 million project of which USD17 million is the education component. The education component introduced distance-learning activities and the development and implementation of plans to ensure the continuity of learning including remote learning options, at all levels of education. These included TV /radio broadcasts, virtual networks of teachers, and other means of distance delivery of academic content at primary, secondary and higher secondary levels. The key activities that are being procured under PREP included: i) Teleschool initiative through Allama Iqbal Open University (AIOU), ii) Content procurement for Teleschool, iii) Strengthening of E-Taleem portal including Virtual Teacher Training (VTT) and Learning Management System (LMS) modules, iv) Development of VTT Training Modules/Courses v) Smart classrooms vi) Procurement and distribution of hand-held devices vii) Communication campaign viii) School on wheels, and ix) the monitoring and evaluation activities.

Data and Research in Education (DARE) is a US$10 million Bank Executed Trust Fund (BETF) provided by the Foreign, Commonwealth & Development Office alongside the ASPIRE program. The project supports Pakistan education sector’s response and recovery by providing technical assistance to the Federal Government, in order to strengthen the education data infrastructure and coordination mechanisms between the federal and provincial governments, enhance evidence-based decision making and improve targeting of programs to reduce inequality and gender-gap. The main components under DARE include strengthening the provincial-Federal education data management processes, enhancing sector coordination on student learning outcomes and improvement of sector monitoring, evaluation and decision making by supporting policy research and impact evaluations.

COVID 19 Response, Recovery, and Resilience in Education Project (RRREP)  - a Global Partnership for Education funded grant of US$19.85 million was successfully closed in November 2022. The project ensured learning continuity through a) broadcasting the digital content on National TV and Radio which reached around 2.7 million children across 58 lagging districts in Pakistan; b) contributed to the evolving EdTech ecosystem at the Federal level by enhancing the Ministry’s digital content library (6000 lessons for grades K-12) and mapping them to the National and Provincial Student Learning Outcomes; and c)  providing adequate infrastructure for the delivery of digital content. Moreover, to ensure safe school reopening post COVID-19, around 1.8 million children in over 12,000 primary schools received sanitizing and hygiene kits, as well as learning materials to lower barriers for re-enrollment and attendance. The Bank has also supported the government’s communication campaign on safe school practices as well as re-enrolment campaigns to encourage families to send their children back to schools once schools re-opened. The project also supported National strategic policy dialogue on strategies to mainstream Out of School Children (OOSC).

Under the 5-year Higher Education Development in Pakistan (HEDP) the World Bank supports research excellence in strategic sectors of the economy, improved teaching and learning and strengthened governance in the higher education sector. The project has been successful in bringing some key reforms in the sector, including: introduction of an Undergraduate Education Policy which established the criteria for Associate Degree and transition of all Bachelor’s Degree programs from two-years to four-years; research capacity development by providing competitive research, innovation, and commercialization grants, such as the Rapid Research Grants, for research on critical COVID-19 related topics and Innovative Seed Fund to support startups and entrepreneurs; expansion of digital connectivity and remote learning systems to ensure continuity of education during COVID-19 and capacity building trainings of faculty, especially females under the newly established National Academy for Higher Education.

The World Bank supported Punjab with an reform program through the  Punjab Education Sector Project-III program (US$300 million), which closed  in June 2022. The Bank also supports interventions in the education sector in Punjab through the Human Capital Investment project (US$200 million, with US$30 million supporting strengthening and scale-up of early childhood education in 11 districts in South Punjab). The project supports the development of a 2-year early childhood education (ECE) curriculum and strengthening of ECE services in Punjab. Currently a minimum of 11,000 ECE classrooms meet new quality standards, which include the presence of a trained teacher and caregiver as well as a kit with instructional material. In addition, content for teaching and learning materials is being updated to ensure alignment with evolving curricula and standards.

The 5 year Sindh Early Learning Enhancement through Classroom Transformation (SELECT) project of $155 million, financed in part by the Global Partnership for Education grant ($55 million) supports the Sindh Education Sector Plan & Roadmap (SESPR) 2019–2024, focusing on 12 of 29 districts in Sindh, with the lowest performance on educational outcomes. Prioritized areas under SELECT include foundational literacy; teaching quality; classroom and provincial assessments improving access to elementary schools and enhancing the school learning environment, including in 250 flood-affected schools; proactive dropout mitigation (especially for girls) and transition from primary to secondary schooling through the development of a student attendance monitoring and redress system; and improved school and district-level governance which contribute to the achievement of its targets.

Balochistan

The Balochistan Human Capital Investment Project (BHCIP), which became effective in 2021, is implemented together with the health sector. The education component (US$17.75 million) focuses on the improved utilization of quality education services in selected refugee hosting districts. BHCIP funds the rehabilitation of schools and upgrading of primary schools to middle and high schools, merit-based hiring of additional teachers and strengthening of the education sector stewardship. To date, BHCIP has initiated the procurement of supplies for schools, including basic furniture, ECE classroom materials, science, and IT laboratory equipment. The project also aims to improve student assessment and teacher training across the province by supporting the Balochistan Assessment and Examination Commission and Provincial Institute of Teacher Education. Use of data for decision making and schools’ capacity to contribute to generating reliable data is another important element of the project that strengthens governance at school and district levels.

Khyber Pakhtunkhwa

In March 2021, the Government of Pakistan approved the US$200 million Khyber Pakhtunkhwa Human Capital Investment Project (KPHCIP) – a five-year project that aims to improve the availability, utilization, and quality of primary healthcare services and elementary education services in 4 districts of Khyber Pakhtunkhwa. The districts were selected because they have some of the highest refugee populations in the province. This financing includes a grant of USD $62.5 million from the IDA18 regional sub-window for refugees and host communities (IDA-18 RSW). The education component (US$115 million) of the project will focus on improving the availability, utilization, and quality of education services in selected districts for all children, especially refugees and girls. Approximately US$19M from the education component are being reallocated for flood rehabilitation and reconstruction in the original districts as well as 9 additional flood-affected refugee-hosting districts. 

OPERATING IN CONFLICT AREAS

In the aftermath of the militancy crisis in Pakistan, the Multi-Donor Trust Fund (MDTF) for Khyber Pakhtunkhwa (KP), Federally Administered Tribal Areas (FATA), and Balochistan was established in August 2010. The aim was to support the reconstruction, rehabilitation, reforms, and other interventions needed to build peace and create the conditions for sustainable development in the affected regions. After more than a decade of implementation, the MDTF officially closed on December 31, 2023.

In two rounds, the MDTF supported a range of projects to help build state-citizen trust in KP, FATA, and Balochistan. Round I of MDTF projects was implemented from August 2010 to March 2017 and focused on helping the provinces come out of the militancy crisis and take strides towards conflict prevention and peacebuilding. Subsequently, Round II was implemented from April 2017 to September 2023, achieving results towards reconciliation, peacebuilding and enhancing state- citizen trust by focusing on three pillars: (i) Growth and Jobs Creation; (ii) Improved Service Delivery; and (iii) Policy Reforms and Improved Governance.

The MDTF has aimed to build peace and create the conditions for sustainable development, but it has also helped address an array of immediate emergencies in Pakistan. For example, the MDTF has responded to unforeseen and immediate needs by supporting livelihood improvement measures in Balochistan in the aftermath of the 2022 floods. Furthermore, the fund was among the first to respond to the COVID-19 pandemic in Pakistan, providing much-needed resources.

The MDTF was closed on December 31, 2023, after the activities were completed and the targeted results were achieved. Of the funds of around USD 283 million, which included USD 11 million in investment income, USD 279 million (98 percent) was used for results, resulting in savings of around USD 3.6 million.

The MDTF achieved noteworthy results under its three results areas. The World Bank will continue to engage with the Governments of Khyber Pakhtunkhwa and Balochistan through several projects that build on the results achieved under the MDTF.

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Latest economic reports have shown a positive trajectory of Pakistan's economy with improved indicators in different sectors especially agriculture.

According to statistics for the current fiscal year by Asian Development Bank, State Bank and Pakistan Bureau of Statistics, growth rate of agriculture sector remained more than 7 percent due to bumper produce of wheat, rice, corn and cotton.

Pakistani rupee also witnessed stability against dollar and bullish trend was observed in Pakistan Stock Exchange.

Due to increase in remittances sent by the Pakistanis abroad, the current account increased by 619 million dollars.

Current account deficit decreased by 87.5 percent to 0.5 billion dollars, helping the State Bank maintain foreign exchange reserves of eight billion dollars.

Asian Development Bank foresees a significant decline in inflation rate from 25 to 15 percent by next year if the economy continues to run at the same ratio.

It merits mention that Special Investment Facilitation Council has made major efforts at the policy level to steer the economy on the right track thus yielding positive results.

Monetary Transmission Through Bank Securities Portfolios

We study the transmission of monetary policy through bank securities portfolios using granular supervisory data on U.S. bank securities, hedging positions, and corporate credit. Banks that experienced larger losses on their securities during the 2022-2023 monetary tightening cycle extended less credit to firms. This spillover effect was stronger for available-for-sale securities, unhedged securities, and banks that must include unrealized gains and losses in their regulatory capital. A structural model, disciplined by our cross-sectional regression estimates, shows that interest rate transmission is stronger the more banks are required to adjust their regulatory capital for unrealized value changes of securities.

The authors have no relevant material relationships to disclose. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.

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How is Pakistan buying fighter jets, submarines despite the economic crisis?

D espite facing a dire economic situation with a foreign debt totaling $124.5 billion, equivalent to 42% of its GDP, Pakistan is persistently expanding its military capabilities, notably through substantial arms imports and collaborations with China. A report by the Stockholm International Peace Research Institute (SIPRI) indicates that between 2019 and 2023, China accounted for 82% of Pakistan’s arms imports, reflecting a deepening military relationship between the two nations.

"China is strongly contributing to the strengthening of Pakistan’s military by providing fighter jets, warships, missile technology, drones, etc. This is part of China’s strategy to counter the influence and power of Quad-4 (that includes India) and the West’s other regional alliances," an opinion piece in the EurAsian Times said.

During President Xi Jinping’s 2015 visit to Pakistan, a significant agreement was forged for China to construct eight Hangor-class submarines for Pakistan, enhancing its naval power. "The submarines will play a pivotal role in maintaining peace and stability in the region. It would add a new dimension to the ever-tested Pakistan-China friendship,” said Admiral Naveed Ashraf, Pakistani Chief of Naval Staff. This deal is part of China's broader strategy to counterbalance the influence of the Quad alliance and Western powers in the region.

Amidst this backdrop of military enhancement, Pakistan grapples with an acute economic crisis, exacerbated by last year's devastating floods which led to a severe reduction in the GDP growth projection from 5% to 0.29%. The financial strain is further highlighted by a comment from the Business Standard, noting, "Pakistan has no food for its people but purchases weapons." The national budget reflects a 15.4% increase in defense spending, totaling 1804 billion rupees, even as the nation contends with skyrocketing inflation and widespread poverty.

The economic hardships have led to public discontent, with Pakistani media reporting severe shortages of basic necessities such as food and medicines. Many believe that the real power in Pakistan lies with the military, which commands a significant portion of the national budget and operates vast revenue-generating enterprises. This perception is reinforced by international discussions, such as those held by the IMF, which highlight the disproportionate allocation of resources to the military at the expense of civil needs, the EurAsian Times report said.

Adding to the controversy, recent reports from the BBC and other media outlets have suggested that despite Pakistan’s official stance of neutrality in the Ukraine conflict, there have been covert operations involving the supply of arms to Ukraine. These reports allege that under American pressure, Pakistan engaged in secret deals that not only violated its declared neutrality but also provided substantial profits from arms sales.

For more news like this visit TOI . Get all the Latest News , City News , India News , Business News , and Sports News . For Entertainment News , TV News , and Lifestyle Tips visit Etimes

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Six Decades of Economic Research at the Bank of England

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Juan Acosta , Beatrice Cherrier , François Claveau , Clément Fontan , Aurélien Goutsmedt , Francesco Sergi; Six Decades of Economic Research at the Bank of England. History of Political Economy 1 February 2024; 56 (1): 1–40. doi: https://doi.org/10.1215/00182702-10956544

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This paper discusses the transformation of the content, role, and status of economic research at the Bank of England in the past sixty years. We show how three factors (the policy functions and missions of the Bank, the attitude of its executives toward economics, and its organizational structure) shaped the evolution of in-house economic research at the Bank during three distinctive periods (1960–91; 1992–2007; 2007–14). Our account relies on a broad set of sources and methods (the Bank's publications, archives, interviews with current and former Bank economists, citation analysis, prosopography, and topic modeling).

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