AS the UK’s Secretary of State for the Department of International Development, I have made Pakistan one of our top partnership priorities. Our two countries share long-standing ties. There are more than one million people of Pakistani descent living in the UK. The UK is a major investor and the top European destination for Pakistani exports.

What happens in Pakistan matters deeply to the UK and I believe that helping Pakistan fulfil its potential is in both our countries’ in­­te­rests. This is why Pakistan is the focus of one of the UK’s largest development programmes.

When I first visited in January 2013, Pakistan was on the brink of a historic transition from one democratically elected government to another. At a dinner that I attended with leaders from all the main political parties, I was impressed to see that there was a deep understanding across all parties of the grave economic challenges the country faced, and a broad consensus on how to plot a path to prosperity. When the current government came to power it had a strong mandate to press ahead with key reforms. Eighteen months later some important steps have been taken, but implementation is challenging.

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I recognise that the macroeconomic situation is fragile. Pakistan has one of the lowest tax-to-GDP ratios in the world, averaging less than 10pc over the last decade. This is not nearly enough to finance critical basic services, such as education and healthcare. Coun­tries with similar per capita incomes average 14pc.

Pakistan is the focus of one of the UK’s largest development programmes.

Similarly, the energy sector and state-owned enterprises (SOEs) are also facing crises. In the power sector this has resulted in extensive load-shedding, while electricity subsidies outstrip state spending on health. Government has been forced to bail out loss-making SOEs, further stretching limited public funds. This is not sustainable. Over the last decade, growth has been far below the 7pc needed to provide jobs for a rapidly growing population.

The present government and finance minister have made progress on many fronts from energy to tax, from privatisation to expanding the safety net for the poorest. This has meant growth is now over 4pc and inflation has slowed. But there is much more to do.

Of these, energy reforms are perhaps the most important. Raising electricity tariffs during the government’s first year was a bold, necessary step. The UK welcomed Prime Minister Nawaz Sharif to London earlier this month for the UK-Pakistan energy dialogue to share experiences and identify private-sector investment. Tariffs which cover costs are a precondition of this, but so are governance improvements of generation and distribution companies, and an effective regulator.

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More revenue is needed through the abolition of tax exemptions and improved tax administration and collection. An important partnership is developing between the UK tax authority HMRC and the Federal Board of Revenue on some of these reforms. The government has made a big commitment to increasing the tax-to-GDP ratio.

The budget for 2014-15 announced rolling back tax exemptions by 0.35pc of GDP and commitment to broaden collection for a similar amount, leading to a fairer taxation system. To put that in perspective, that is worth a potential Rs200 billion each year. This is more than the annual grant aid which the main development partners have provided in recent years.

Continued reform of SOEs has tremendous potential to create further fiscal space. Improved management and strategic divestments would provide funds for much-needed development expenditures.

With all these necessary reforms there is a risk of increased economic vulnerability for some. The national social safety net provided through the Benazir Income Support Programme is a critical lifeline for those in the bottom 20pc of the population to provide at least a small amount of predictable cash.

We know this helps ensure basic nutrition, family health and better lives. The finance minister increased the Bisp stipend in the last budget, which is encouraging. Improvements to the reliability of cash transfers have been achieved through innovative biometric and debit card systems. DFID wants to work with the government to continue strengthening this national social safety net, of which Pakistan can already be proud.

Pakistan’s economic challenges are clear. So are the solutions, however tough they might feel. The government’s 14-point reform agenda provides the right framework — including reforms that opposition parties endorsed in their own economic manifestos.

The primary responsibility for these reforms lies with the government, but every Pakistani leader has a role to play in supporting the steps necessary for a more prosperous Pakistan.

The UK will continue to work in partnership with Pakistan, and the UK government will do its best to support those from across the political leadership who support reform and are seeking to promote more prosperity in their country.

The writer is secretary of state for international development in the UK.

Published in Dawn December 9th , 2014