World Bank’s timely offer

PAKISTAN hopes to sustain and build its economy with the help of the World Bank’s concessional as well as non-concessional windows after the conclusion of the current three-year IMF programme amounting to 1.3 billion dollars from its Poverty Reduction and Growth Facility (PRGF). The prime minister’s adviser on finance, Shaukat Aziz, is said to have informed Mr. Zafarullah Khan Jamali that after the conclusion of the PRGF programme in 2004-05, Pakistan will not be needing any more assistance from the Fund but will still require generous and concessional funding from the World Bank and the Asian Development Bank for some time to cover the anticipated gaps in external financing which in the next three years alone is estimated to go up to about six billion dollars. The World Bank has indicated its readiness to offer 1.8 billion dollars during the next three years to cover part of this gap. About $600 million of this amount is expected to be offered on IDA terms which are highly concessional. The rest will be offered on the normal terms but the mix would perhaps carry an average of about 07 to 1 per cent mark-up. Assistance from the WB would carry not only relatively lower mark-up but its conditionalities too will not be as harsh and as intrusive as those of the Fund.

In fact, the WB would not be as concerned about Pakistan’s budgetary deficits and public sector expenditures as the Fund has been all these years. Because of the latter, while we have achieved a modicum of macroeconomic stability in recent months, the overall economy has only stagnated, unemployment has gone up and poverty has increased. The Bank will certainly have its own conditionalities and will insist that we reform our civil services, including pay and pensions structures, eliminate staff redundancy in provincial departments and autonomous and semi-autonomous bodies through right-sizing, deepen banking sector reforms and strengthen regulatory and supervisory role of the State Bank of Pakistan. However, these reforms are not as stifling for the economy as those of the IMF. If implemented judiciously and with proper spacing, they may actually generate more economic activity all around and add to the growth while alleviating poverty.

Pakistan has missed a number of chances in the past to get rid of the harsh and stifling IMF conditionalities because when it had the financial space to do it, it wasted it by squandering resources on uneconomic activities. Now there is one more opportunity to withdraw from the Fund’s unhelpful conditionalities because of a favourable turn in economic circumstances in the wake of 9/11, including a generous debt rescheduling round from the Paris Club and a record accumulation of foreign exchange reserves. The strategy adopted by the economic managers to get out of the Fund’s clutches for good by entering into WB programmes appears to be wise and realistic. The Poverty Reduction Strategy Paper(PRSP) which is being finalized these days has very correctly noted that a weak, ill-organized and inadequate public service delivery system has neutralized the best of some of the past plans and huge resources. Therefore, the issue of improving governance is central to fighting poverty. The World Bank will not only be actively engaged in helping Pakistan in improving the delivery system at the grassroots level, but will also be providing concessional resources to cover the gaps that will result from expected dislocations while the process of building the grassroots institutions takes place.

Advice to Washington

SAUDI Arabia, one of America’s closest allies in the Middle East, is the latest among the nations which have raised their voice against an attack on Iraq. In a BBC television interview, Foreign Minister Saud al-Faisal did not rule out war but insisted that if there had to be a war, it must be authorized by the United Nations. Without UN authorization, he said, an American attack would constitute “aggression.” The Saudi foreign minister is not the only diplomat to have said so. The other day, UN Secretary-General Kofi Annan said virtually the same thing. Avoiding the word aggression, Annan said a unilateral American attack would lack legitimacy.

Prince Faisal’s statement is particularly significant because it comes from a country that is important for many reasons. Saudi Arabia not only has the world’s largest reserves of oil, it has been America’s close ally and friend since before the cold war. Secondly, besides being a major Arab country, it occupies a special position in the Muslim world because its ruler is the “Guardian of the Two Holy Places.” Any lead coming from Saudi Arabia on any given issue is, therefore, taken seriously by the rest of the Muslim world. On the Iraqi issue, Saudi Arabia has been prevaricating. Earlier, it had opposed an attack on Iraq under any circumstances. Now it believes that if an attack must at all be there, it must have the UN sanction. Another Saudi leader, Deputy Defence Minister Abdulrahman bin Abdel Aziz, hinted that Riyadh would not allow foreign troops to use its soil for attacking another Arab country. Prince Faisal also warned that a regime change would end one problem but create many more as a consequence of military action. One hopes Washington will listen to the advice of one of its closest Arab allies and not embark on the adventurous course of invasion of Iraq under prodding and shoving from the hawks in the White House.

Controlling pollution

IT is reassuring that the Pakistan Environmental Protection Agency (PEPA) plans to embark on a project to monitor the air and water quality in the federal capital and the four provincial headquarters. This pollution control project is all the more important since it has been reported that recent surveys by PEPA have detected the presence of a high level of suspended particulate matter and other toxic gases in these major cities — six times higher than the WHO-determined safe limits. Moreover, it has been established by research abroad that the level of air pollution is directly related to the incidence of respiratory diseases, which are common in Pakistan. The project, to be aided by the Japanese government, involves the establishment of stationary and mobile monitoring stations in the cities to collect the necessary air and water pollution data according to specific parameters and analyse them.

This project will no doubt be an important step in the direction of helping PEPA to define air and water quality standards for Pakistani cities. This will in turn help PEPA to set fuel standards (sulphur content in diesel fuel), and standards for all kinds of vehicles, factories, hospitals and other commercial enterprises which either emit gases or discharge wastes in large quantities. All this will begin to have a positive effect on the environment only if PEPA, together with other concerned authorities, also work at implementing these measures through regular monitoring of vehicles, factories, etc., to ensure that they comply with the appropriate gas emission and waste discharge standards or else face action. Only if an effective air and water pollution control strategy of this kind is charted out, can we hope to successfully combat the growing problem of air and water pollution affecting people’s health.