ISLAMABAD, May 11: Lenders on Wednesday flagged performance and credibility gaps in Pakistan and said that macroeconomic imbalances such as fiscal deficit, inflation and foreign trade deficit could be unbearable for the country.
They also mentioned vulnerability of foreign exchange reserves and rising economic disparities and stressed the need for a ‘tight monetary policy’.
Pakistan, on the other hand, asked international lenders for an investment of at least $60 billion over the next five years for water and energy security and transport improvement.
“Help us to help improve the condition of the people in Pakistan,” said Dr Salman Shah, adviser to prime minister on finance, at the concluding session of the Pakistan Development Forum (PDF).
As donors stressed the need for second-generation reforms to enable them to assist Pakistan in achieving equitable growth, modernisation and poverty reduction, State Bank governor Dr Shamshad Akhtar and Dr Ishrat Hussain assured development partners that the suggested reforms, including those approved by the National Commission for Government Reforms, were to be introduced soon.
World Bank director for Pakistan John Wall was very vocal in putting the record straight while the government representatives painted a rosy picture of the country’s economy.
“Throughout the PDF we heard a pretty rosy picture that is greatly different than 3-4 years ago...We must remember we are comparing a very lean 2001 with a flush 2005. It is also clear that while the poor became better off, the rich became richer even faster, with some deterioration in equity,” Mr Wall observed.
He said Pakistan now faced higher quality problems in the shape of high inflation and trade deficit and hence the ‘tight fiscal, easy money’ formula should now be replaced with ‘tight fiscal, tight money and credit’ to sustain rapid growth.
He said the country faced capacity problems resulting in backlogs and imports and added that comparing the last four years with next four years “I see a macroeconomic imbalance that, unless rectified, will prove to be unsustainable in terms of foreign trade, inflation, exchange rate stability and foreign exchange reserves”.
He expressed doubts about the adequacy of government efforts to ensure 6-8 per cent growth.
The World Bank specifically raised the poor performance of the power sector. WB vice-president for South Asia Praful Patel inquired about the government’s strategy to phase out over Rs100 billion subsidy.
He said reforming the power sector had proven to be ‘full of political constraints’ and was moving very slowly.
Almost similar views were expressed by bilateral delegates like Japan, European Union and Canada. Some delegates also called for creating linkages between the small and medium enterprises and the large-scale manufacturing for sustainable economic growth.
Water and Power secretary Ashfaq Mahmood presented a huge investment portfolio. He said Pakistan required between $10 billion and $17 billion to increase the power generation capacity by 6,000MW over the next five years.
Similarly, he said, the country required about $25 billion or Rs1,560 billion to develop water sector infrastructure over the next 10 years.
Of this, Rs1,150 billion would be required for the construction of Kalabagh, Diamer-Bhasha, Akhori, Kurram Tangi and Munda dams by 2016.
He said the government planned to develop about 8,800MW of electricity from nuclear resources besides tapping wind, solar and coal-based plants and import from Central Asian states.
