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Pakistan PM Khan Speaks with Global CEOs on Strategic Priorities in Post-Pandemic Era

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The World Economic Forum today hosted a “Special Dialogue with Prime Minister Imran Khan” for its members and partners, chaired by Forum President Børge Brende. The session gave chief executives from across the world an opportunity to hear directly from the prime minister on the factors behind Pakistan’s resilience to the economic shocks of the pandemic and his country’s post-COVID-19 recovery strategy.

In the virtual session, Khan explained the policy priorities of the Government of Pakistan, including regional connectivity projects like the China-Pakistan Economic Corridor (CPEC), and progress on talks to improve trade flows between Afghanistan and Pakistan following his visit last week to the Afghan capital. Khan also responded to questions from chief executives on promoting a digital economy in Pakistan and improving the enabling environment for long-term investors.

“My aim is for Pakistan’s economy to emerge greener, fairer and stronger from the pandemic. It is crucial for us to work with the international business community and partners like the World Economic Forum to share the important reforms underway here and help global businesses participate in the emerging opportunities in Pakistan,” said Imran Khan, Prime Minister of Pakistan.

“Pakistan’s economy has shown remarkable resilience to the pandemic, placing it in a strong position to rebound quickly from the shock. The Forum convened this dialogue with Prime Minister Khan for global business leaders to discuss the country’s economic response in greater detail and to understand where they could contribute to Pakistan’s ambitious recovery strategy,” said Børge Brende, President, World Economic Forum.

More than 70 members and partners of the World Economic Forum from around the world participated in the virtual session.

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Report Underlines Reforms to Support Fiscal Federalism, Green Growth in Nepal

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Nepal has made significant strides in implementing fiscal federalism while key reforms are needed to support fiscal sustainability and Nepal’s transition towards green, resilient, and inclusive development states the World Bank’s Public Expenditure Review (PER) Report on Fiscal Policy for Sustainable Development launched today.

With the country’s transition to federalism, expenditure responsibilities have been devolved to subnational governments that are predominantly financed through intergovernmental transfers and revenue sharing. These now account for between 8 and 9 percent of GDP per year (or close to 30 percent of the annual budget). While federalism is helping bring policymaking closer to the people, it has also increased fiscal spending and (exacerbated by the COVID-19 pandemic) led to a sharp rise in fiscal deficits and public debt, states the report.

“This report provides an analytical basis to inform our reform efforts to strengthen federalism and create fiscal space to support our new focus on a green, resilient, and inclusive development (GRID) model,” statedMr. Madhu Kumar Marasini, Finance Secretary. “This complements our ongoing efforts to refine the fiscal transfer system put in place the systems for monitoring and reporting for a more results oriented and accountable delivery of local services.”

The PER identifies key reforms to help Nepal strengthen fiscal sustainability and initiate a shift to a GRID pathway. It identifies the following five top priority reforms: (i) Encouraging the update of subnational spending responsibilities through the intergovernmental grants system; (ii) supporting exports and job creation through reforms to import duties; (iii) strengthening domestic revenue, for example by reviewing VAT exemptions; (iv) enhancing public capital spending by rolling out the National Project Bank; and (v) providing fiscal incentives for a green growth transition.

“The World Bank will continue to support government reforms to improve fiscal sustainability and the implementation of fiscal federalism, drawing on the recommendations of the PER Report,” said Faris Hadad-Zervos, World Bank Country Director for Maldives, Nepal, and Sri Lanka. “This report complements our human development PER, both of which will help inform the design of World Bank support to Nepal, including through our ongoing support through our various Development Policy Credits.”

The report also stresses the importance of strengthening investment processes and fiscal policies for green growth, and fiscal policy reforms to enable Nepal to use its green electricity surplus to mitigate air pollution to protect the health of people and the economy.

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Philippines: Boosting Private Sector Growth Can Strengthen Recovery, Create More Jobs

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Rebounding from a deep contraction in 2020, the Philippine economy is forecast to grow 5.3 percent this year before accelerating to an average of 5.8 percent in 2022-23 on the road to recovery, according to the Philippines Economic Update (PEU) titled Regaining Lost Ground, Revitalizing the Filipino Workforce, released today by the World Bank.

Government spending on infrastructure is expected to buoy growth, aided by the steady progress in vaccination leading to greater people mobility and the revival of businesses. Barring a new uptick in COVID-19 cases, household consumption is projected to recover, anchored on rising remittances and improving incomes as more people regain or find new jobs.

“The new variant has added a layer of uncertainty but economic reopening, along with progress in vaccination, is clearly strengthening domestic dynamism and market confidence,” said Ndiame Diop, World Bank Country Director for Brunei, Malaysia, Philippines and Thailand. “As the recovery gains traction, it will be important to enhance private sector participation in the recovery by deepening current efforts to make the country’s business environment favorable to job creation while upskilling the workers so that they can benefit from new or emerging job opportunities.”

Reforms that open more sectors to foreign investments, streamline administrative procedures to facilitate market entry and encourage firms to adopt new technology are measures that can boost private sector growth, create more jobs, and strengthen recovery, Diop added.

The nearly two-year long pandemic, however, has forced the closures of many firms, leading to losses of jobs and incomes, alongside health insecurities and disruptions in children’s education.

The Philippines underwent two surges of COVID-19 infections this year, first in March-April and in August-September due to the more infectious Delta variant. In both instances, the authorities reinstated strict mobility restrictions in Metro Manila and nearby provinces, and key metropolitan areas.

Nonetheless, the recent surge and mobility restrictions have not severely hampered economic activity. As a result, the economy expanded by 4.9 percent in the first three quarters of 2021, rebounding from a 10.1 percent contraction over the same period in 2020.

In 2022, the phased economic reopening is expected to benefit the services sector especially transportation, domestic tourism, and wholesale and retail trade. Sustained public investment will continue to support construction activities.

The PEU flags that despite encouraging trends, the COVID-19 pandemic remains a major risk to the country’s growth prospects.

The report notes that even in countries with high vaccination rates, infections have continued to spread, albeit with greatly reduced severity of illness, hospitalization, and mortality. Variants of concern, breakthrough cases, and waning vaccine efficacy have highlighted the complexity of economic reopening.

“Speeding up vaccination especially in areas outside the National Capital Region and sustaining the observance of health protocols including masking and maintaining social distancing are measures that remain important as the country navigates the challenges of reviving the economy,” said Kevin Chua, Senior World Bank Economist.

Social protection measures, Chua added, including the country’s cash transfer programs remain important measures to mitigate the adverse impact of the pandemic on livelihoods, health, and education, especially among poor families.

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World Bank Supports Cabo Verde to Build a Sustainable and Equitable Recovery

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The World Bank approved a $30 million Development Policy Financing Operation on December 6 to support the Government’s efforts to strengthen policies for a sustainable, equitable, and greener recovery from the COVID-19 crisis in Cabo Verde.

As Cabo Verde is recovering from the largest economic contraction in history and leveraging the moment to embark in an ambitious reform agenda, this operation supports policy action to lay the foundations for economic recovery by reducing fiscal risks and improving debt transparency, strengthening the resilience of poor and vulnerable households, particularly women, and enabling a sustainable private sector-led recovery,” says Nathan Belete, World Bank Country Director for Cabo Verde.

This operation, the first in a series of two, is closely aligned with the priorities the Government outlined in its recovery strategy, Cabo Verde Ambição 2030.

The program supports reforms to reduce fiscal risks and improve debt transparency by strengthening fiscal risk management and improving the quality, frequency, and coverage of public debt reporting, including from State-Owned Enterprises. It also builds on the COVID-19 response program to strengthen the social protection system to enable a faster and better targeted response to external shocks. Finally, the operation promotes socially and environmentally responsible private investment in tourism, aquaculture, and tourism.

In sum, the program of reforms supported by the operation is expected to have positive effects on poverty, positive social and environmental impact, and increase the resilience of the economy to external shocks.

The World Bank supports Cabo Verde through 9 national IDA/IBRD projects for a   net commitment of $186 million, one regional project for an amount of $15 million along with a comprehensive program of analytical services. These activities contribute to the country’s overall economic growth and development through the implementation of economic reforms related to transport, governance, private sector development, tourism competitiveness and diversification, social and productive inclusion, debt management capacity, human development, and digital transformation.

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