ISLAMABAD (December 24 2002) : Pakistan's economic revival programme is beginning to produce good results, while it needs to follow its course to reach its long-standing goals.
The improvements in governance of public entities, the improved creditworthiness, reduced tariff, the competitiveness, and now stability of the exchange rate, the fall in the interest rates and the expectation of the continuation of the improvement in the business climate have begun to show up in increased foreign investment, particularly in the textile and oil and gas sectors.
Increased domestic investment has to follow if the growth in income and employment is to flourish.
This was stated in 'Pakistan Country Update', released on Monday by World Bank, appreciating government reforms of the last few years.
The public's perception of the state of governance has improved markedly in the past few years.
The long-standing goals include more and better income and employment for all; and sustained poverty reduction.
Reaching these goals requires faster economic growth, improved governance and building human capacity to develop each citizen's potential.
Structural reforms need to be continued and implementation accelerated to build upon the recent successes.
This is the only way to enable Pakistan to increase pro-poor growth, reduce poverty, maintain macro-economic stability and to make faster progress towards development goals, the report said.
PRO-POOR ECONOMIC GROWTH: Faster economic growth requires an attractive investment climate.
This is needed both to increase the low investment rates of the past and to yield better returns and faster growth of employment from the existing investment.
This in turn requires a stable macroeconomic environment, good governance and a low cost business-operating environment provided by adequate and efficient government provided business services and infrastructure.
MACRO-ECONOMIC STABILITY: Pakistan has turned around a deteriorating macro situation of a few years ago to a rapidly improving one.
The budget deficit has fallen (and a surplus before paying interest).
Inflation has remained below 5%. The current account deficit in the balance of payments has turned into a surplus (and before interest expense, a large surplus). Exports have begun to grow again, after years of stagnation.
Remittances from abroad jumped to double and possible triple their 2000-01 level.
The foreign exchange market strengthened and the rupee appreciated against the currencies of its main trading partners, most rapidly against the dollar.
Pakistan's Debt Reduction Strategy is ahead of schedule, with falls in both external and domestic public debt as a percent of GDP. Combining the increased exports with the increased workers' remittances, the increased aid disbursements and the substantial debt reduction received post-September 11, Pakistan's external creditworthiness standing has improved sharply.
Domestic public debt service has also begun to improve, due to the reduced need for budget borrowing and the fall in interest rates on government debt.
Public expenditure on development has begun to rise as percentage of GDP while spending on interest and defence has fallen.
GOOD GOVERNANCE: Good governance requires clear accountability for the use of public resources, a civil administration serving the public interest, respect for the rule of law and a level playing field for private activities through the creation of a sound enabling and regulatory environment.
Pakistan is implementing thoroughgoing reforms in public accounting and audit. These include the separation of audit and accounting; the modernisation and automation of public accounting throughout the three tiers of government; a sharp improvement path for the quality, relevance and timeliness of audits; and the revitalisation of public accounts committees and follow-up with consequences where material irregularities are uncovered.
