ISLAMABAD, Jan 20: Prime Minister's Task Force on Poverty Alleviation and Employment Generation is expected to recommend a Rs200 billion Public Sector Development Programme (PSDP) for 2004-05 with a view to containing rising poverty levels in the country.

An important member of the task force told Dawn here on Tuesday that the government was being advised to increase PSDP funding from the current 3.6 per cent of GDP to 5 per cent of GDP in the next financial year to make a dent in the widespread poverty.

"Now that all efforts have failed to attract private sector investment, the government is left with no other option but to increase public sector spending for reducing poverty and generating new jobs," he said.

He said the task force was expected to formally recommend in its next meeting an increase in the PSDP size from the current Rs160 billion to Rs200 billion for the next fiscal year.

The meeting is slated to be held sometime this month, he said. Since the country has been blessed with significant fiscal space, thanks largely to 9/11, a majority of the task force members is calling for increased allocations of resources for social sectors from the next financial year, he noted.

"The government seems to have been convinced by a study conducted by former IMF director Mr Mohsin Khan that public sector expenditure should be increased for poverty alleviation and job creation," he said, adding that economists of the Pakistan Institute of Development Economists (PIDE) "have also favoured that approach."

He said the government will have to change its thinking that the public sector should stay away from making new investment and the private sector should lead the effort.

"We want a visible shift in the thinking of finance ministry officials who are opposed to an increased public sector role in this behalf," he added. The task force member said the government would be advised to make investment in the social sector and infrastructure development which will ultimately reduce the cost of doing business in Pakistan and thus contribute to poverty reduction and job creation.

"Many members of the task force believe that if there is no increased public sector investment then the government should stay ready to face more inflation and more instability in the country," he said. He said that since fiscal deficit was lower than the GDP growth rate, it was necessary to increase public sector spending.