November 21, 2002	Thursday	Ramazan 15, 1423

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ISLAMABAD, Nov 20: The IMF has said that a main challenge for Pakistan is to continue governance reforms for creating the institutional environment that will give domestic and foreign investors the confidence needed to generate more jobs and higher growth.

An IMF staff team led by Klaus Enders, divisional chief in the Middle Eastern Department here on Wednesday concluded two weeks of discussions with the authorities which were held as part of the fourth review of Pakistan’s economic programme that is supported under the IMF’s Poverty Reduction and Growth Facility (PRGF).

According to an announcement made by the local IMF office, the staff reached an understanding on the future economic challenges and the policy steps required to keep the programme on course. “The IMF staff looks forward to continue the economic policy dialogue with the Pakistan authorities with a view to completing the steps required for the next Executive Board meeting which could take place in early 2003”.

Completion by the Executive Board of the fourth PRGF review would release a fifth disbursement of about US114 million to Pakistan under the PRGF, said the IMF office.

The mission team commended the efforts to continue implementation of their comprehensive economic reform strategy, which has brought significant macroeconomic achievements.

The rate of inflation remains under four per cent, official foreign reserves have reached a record US $6.6 billion, and the Pakistani rupee has appreciated against the US dollar. Economic growth of 4.5 per cent this fiscal year appears attainable, and the Central Board of Revenue receipts remain on target. Against this background, the State Bank of Pakistan has been able to lower the discount rate. Structural reforms have continued including in the banking sector and tax administration.

The team also stressed the need for further improvement in the delivery of social services, through strengthening systems to monitor the performance of schools, health units and other social service providers. Another central theme of the discussions was the need to stem the drain on the budget by public enterprises in order to safe guard public outlays for essential infrastructure and poverty alleviation, while achieving the planned reduction in the public debt burden.

Compliance by the Water and Power Development Authority and Karachi Electricity Supply Corporation with their respective financial improvement plans (FIPs) will require greater efforts for improved governance and operational efficiency, timely payment of bills by the private and public sectors, and pass-through of the fuel cost. The planned publication and reporting on the first quarter outcomes under the FIPs by end-November should contribute to an informed public debate on the challenges and constraints facing the two companies.

The IMF approved three-year arrangement for Pakistan under the PRGF totalling SDR 1.034 billion (about US$1.33 billion) on Dec 7, 2001. Pakistan received the fourth disbursement on November 18, 2002, bringing the total amount drawn under the PRGF to SDR 344 million (about US$454 million).