The International Monetary Fund (IMF) Resident Representative in Pakistan, Esther Perez Mahencha, stated that Pakistan needs to increase its Tax-to-GDP ratio to 15% to overcome its economic and climate change challenges.
She made these remarks during a seminar titled “Financing Sustainable Development in an Emerging World” at the 28th Sustainable Development Conference, hosted by the Sustainable Development Policy Institute (SDPI). The IMF representative highlighted that a limited tax and export base, an inefficient energy sector, and loss-making State-Owned Enterprises (SOEs) are the biggest impediments to Pakistan’s progress.
IMF’s Support and Goals
Mahencha added that the recently approved $1.4 billion US dollar plan for Pakistan, under the Resilience and Sustainability Facility (RSF), will play a crucial role in strengthening the country’s economic resilience and its capacity to withstand climate shocks. This initiative aims to integrate environmental aspects into Pakistan’s public financial management and promote long-term sustainable development.
She explained that the RSF is working parallel to Pakistan’s ongoing Extended Fund Facility (EFF), a three-year structural reform program set to continue until 2027. Mahencha emphasized that both programs represent Pakistan’s own reform efforts, supported by the IMF.
Funding Gap for Sustainable Development
Samuel Rizk, UNDP Resident Representative in Pakistan, stated that the world is undergoing a transformative phase where financing has become more appropriate and crucial to ensure sustainable development. He noted that to achieve the Sustainable Development Goals by 2030, Pakistan requires approximately $50 billion US dollars in annual financing, whereas global institutions like the World Bank, IMF, and Asian Development Bank can provide a maximum of $8 to $10 billion US dollars annually. He stressed that the government is the largest financing source for sustainable development, but regretted the absence of a government representative in the discussion.
World Bank Warning on Climate Impact
Dr. Bopilma Amgabaazar, World Bank Country Director for Pakistan, stated that Pakistan’s vulnerability to climate and natural disasters is extremely high, with air and water pollution also on the rise. She mentioned that the World Bank issued the Country Climate Development Report in 2022, which estimated that if Pakistan fails to prepare for climate change challenges, natural disasters could lead to a reduction of 18% to 20% in its GDP by 2025. She noted that the 2022 floods caused $30 billion US dollars in losses to Pakistan, while the losses from this year’s floods are estimated at $2.9 billion US dollars.
She disclosed that the World Bank has committed $20 billion US dollars in financing for Pakistan for the next 10 years, which is intended not just for economic development but also for tackling the post-effects of climate change.
Dr. Amgabaazar stressed that academia and civil society are also crucial for the developmental role of the provinces in helping Pakistan overcome its current economic and environmental challenges. She pointed out that Pakistan has one of the highest population growth rates compared to many countries, which, combined with increasing population and weakening natural resources, could lead to severe consequences for the country’s future.
Call for Private Sector Investment in Technology
Jason Evansina, CEO and Managing Director of Nestle Pakistan, said that the country needs to invest in technologies that ensure access to clean energy, efficiency in production, and effective resource management. He emphasized the need to increase cooperation within the private sector to promote shared learning and development, which should be centered on reforms within existing systems and frameworks.
