23 May 2004	Sunday	03 Rabi-us-Saani 1425

ISLAMABAD, May 22: The World Bank and the IMF have asked the government to contain the overall fiscal deficit to 3 per cent on average during the financial years 2004-07.

Informed sources told Dawn that, although the government planned to have 3.9 per cent fiscal deficit target during 2004-05, both the donor agencies believed that the containment of this deficit to 3 per cent was necessary for the country's economy during the next three financial years.

The government was also proposed to improve its fiscal position by enhancing the tax-to-GDP ratio to 17 per cent during 2004-07. Both the donors believed that this tax to GDP ratio remained stagnant around 13 per cent due to existing narrow tax base, difficult tax regime, weak tax administration and the wide spread culture of tax evasion and corruption.

The government has assured the donor agencies that it was focusing on tax reforms specially in the next budget and that the tax policy reforms included reduction in the multiplicity of taxes both at the federal and provincial levels, rationalization of various taxes and further reduction in corporate tax for banking and non-banking companies.

The sources said that the donor agencies have also called upon the government to accelerate the CBR reforms in the next budget including a complete reorganization over a three year period (2004-06) and the fundamental changes in human resource management.

The government was also asked to work out a speedy privatization plan in the next budget specially by indicating a timetable for the disinvestment of Water and Power Development Authority (WAPDA) and the Karachi Electricity Supply Corporation (KESC) as both these public sector power utilities were drain on the national budget.

"The government must give a plan to reduce 23 per cent and 41 per cent line and distribution losses of Wapda and the KESC respectively in the new budget," a source in the local multilateral agency said.

He expressed his concern over the government's continued offering of billions of rupees funds to Wapda and the KESC to cover up their losses.

The government was also asked to fund the poverty reduction strategy by raising priority poverty spending by 2 per cent of the GDP to about 7 per cent by 2007. Likewise, substantial increased allocation should be lined up for education and health focusing on both qualitative and quantitative improvements.

The donors were also hoping that the government would develop a clear vision which integrates long term development of agriculture and power sectors with investments in irrigation sectors.