ISLAMABAD, Oct 13: The donor agencies have linked the finalization of the multi-million dollar poverty reduction strategy programme (PRSP) and Rs10 billion increase in public sector development programme (PSDP) to smooth transfer of power to the elected government.

A senior government official told Dawn on Sunday that the International Monetary Fund and the World Bank had told the military administration that long-term PRSP would be finalized and signed with the elected government in December.

The donors and the military government in broad consultation with local communities and other stakeholders have prepared interim poverty reduction strategy paper (I-PRSP) over the last three years.

The government and the donors believe that the I-PRSP provides a sound basis for concessional assistance and would act as an umbrella for all grants, loans and project financing in the next three years.

The IMF and the World Bank, said the official, were convinced that Pakistan had established a record of sound macroeconomic management and structural reforms. The elected government will need to develop a more thorough and final costing of poverty alleviation and social programmes, the official said.

Solid support by the new government, clear allocation of responsibilities and accountability at all levels of administration, coupled with continued donor assistance would be key in achieving the strategy’s objectives, the donors believed.

The official said that although the president had approved in principle a Rs10bn increase in PSDP-2002/03 — from original Rs134bn to Rs144bn — its confirmation would be possible only after the final commitments of grants by the donors when the new government was in office.

He said the donors were expected to convey to the government their confirmation of the grants in later part of November and only then it would earmark additional funding.

The government is not going to increase the PSDP allocation out of its resources, instead, the additional funding would come out of the foreign grants, the official said.

Supposing the donors are not satisfied with the process of transfer of power, the grants would not be forthcoming and the development programme would remain at the original level, said the official but added that now it was just a formality to increase the PSDP allocations.

Of the Rs10bn proposed increase in PSDP allocation, Rs6bn would be utilized for urban infrastructure development. The remaining Rs4bn would be spent on Katchi canal project and special development programmes in Azad Kashmir, Northern Areas and Federally Administered Tribal Areas.

Around $2.6bn net exceptional financing from the international financial institutions is expected to come during 2002-2003, down by around 22 per cent from last fiscal year’s $3.3bn.

The major portion of assistance was a result of rollover of foreign deposits with the banking system in 2001-2002.