23 March 2004	Tuesday	01 Safar 1425

ISLAMABAD, March 22: Improvement in power sector and devolution still remain the key challenges to Pakistan's economic growth but more importantly, there are some major missing links to future plans for poverty reduction , employment, investment generation and overall reforms agenda.

This has been noted in a report released recently by a joint World Bank/IMF team assessing Pakistan's poverty reduction strategy. Both the World Bank and the IMF have also called for further increase in domestic revenue, lower interest expenditure and compressing other expenditures, notably transfers to the public sector enterprises, in particular the power sector.

"Many challenges remain to ensure that devolution will yield the expected improvement in access to and quality of service delivery". The Poverty Reduction Strategy Papers (PRSP) did not clearly address the challenges of implementing fiscal transfer and devolving responsibility for services, such as water and sanitation, and understates the need for creating incentives for provinces and districts to generate own-resource revenue.

The cross-cutting challenge is to draft an explicit and prioritized road-map of reforms and policy actions envisaged in the medium term with a clear time limit.

Specific policy challenges include, strengthening the financial performance of the power sector to reduce its large budgetary cost and improve reliability and access to electricity; successfully implementing administrative and fiscal devolution, including capacity building at the lower tiers of the government for better and effective service delivery.

The challenge is also of introducing a broader rural strategy to improve agriculture productivity, expand non-farm rural employment and reduce rural poverty, and implementing the Core Welfare Indicators Questionnaire (CWIQ) survey and finalizing broader institutional arrangements for monitoring and providing timely feedback into the policy process.

"The diagnostics do not clearly identify sectors where growth and employment generation would have the greatest impact on poverty. The links between livestock and crop farming and rural poverty should be explored more fully to underpin the stated objective of improving agricultural productivity".

While the measures on housing finance emphasize the growth- enhancing aspects of housing construction, its role in reducing vulnerability could have been shown more clearly through relevant poverty diagnostics.

The report said a number of questions - including adjustment of the poverty line over time for price changes and the choice of equivalent weights - are still subject of debate. The provisional poverty numbers reported in the PRSP may be revised upon resolution of these issues.

There is also a lack of clarity on some key specifics such as the mechanisms through which the data and reports generated by the monitoring institutions would provide timely feedback into the policy process.

"While the document (PRSP) identifies four key areas where capacity has to be developed at the secretariat and within various levels of government, there is no clear plan on how this need will be addressed".