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KARACHI, Nov 8: Regional Vice President of the World Bank for South Asia Mieko Nishimizue said on Thursday that the government should not allow the structural reforms to derail or slacken in the post-September 11 situation.
She said this at a meeting with selected bankers and business executives at the State Bank office. The representative of the World Bank in Pakistan John Wall was also present. Sources privy to the meeting quoted Mieko as having said that if the reforms remained on track Pakistan could benefit from the opportunities coming its way after September 11.
Earlier Meiko and John Wall met senior officials of the State Bank including Governor Dr Ishrat Husain. It could not be learnt what issues were discussed there.
Meiko is on a 10-day visit to Pakistan to discuss key economic issues and get first hand knowledge about how the country had been affected in the wake of the September 11 terrorist attacks on New York and Washington.
Sources privy to her meeting with leading bankers and business executives said participants of the meeting were of the opinion that the World Bank and the IMF should allow slippages in ongoing reforms in Pakistan. “We asked her to make adjustments in the targets assigned to Pakistan to pave way for greater government spending to get the economy out of slump,” said one participant who declined to be named.
Containing fiscal expansion has been one of the key areas of a three-year reforms plan that Pakistan stands committed to carry out to qualify for low-cost medium term assistance from the IFIs.
But the government now needs to follow an expansionary fiscal policy to contain the spillover of the global recession on Pakistan economy and to offset the impact of the post-September 11 situation. The growth of the economy slowed down to 2.6 per cent in fiscal 2000-01 against the target of 5 per cent. It may decelerate further in the wake of the global recession combined with the country-specific problems that emerged after September 11.
Sources privy to the meeting said the participants told the visiting WB official that textile and automobile sectors stood more vulnerable to the shocks reverberated by the September 11 terror attacks on the US. They said some participants informed her that many textile millers had not been getting enough new orders from their buyers in the US and in the European countries after September 11. Other participants said the automobile sector had also been hit and not many people are buying cars now. Auto industry sources say sales of cars dropped by 4.6 per cent in September over August 2001. They fear further fall in car sales in October onwards.
CBR RESTRUCTURING: Sources close to the meeting said there was a unanimity of opinion on one thing: Though the World Bank-IMF sponsored reforms have led to better governance elsewhere it has not been the case with Central Board of Revenue. They said all participants agreed on the need to shift the focus of the tax policies from levying more taxes on those already in the tax net to taxing those who are still out of the net. The participants also said that the reforms so far taken had not resulted in an overall improvement in the working of the CBR officials and staff though there seems to be a better understanding of issues at the top.
The sources quoted Mieko as saying that Pakistan government had already chalked out a comprehensive restructuring plan for CBR adding that part of this plan was yet to be implemented. She said she knew that CBR working had not improved up to the mark even in the areas where the reforms had already taken place.
EXCHANGE RATE: Business executives present at the meeting said that the dramatic decline in the dollar value since September 11 had left exporters uncompetitive in the world markets.
They said though the State Bank had tried to provide them with some relief by easing the monetary policy yet the impact of the depreciating dollar had more than offset whatever relief they had got so far.
Sources close to the meeting said Mieko would not comment on how the State Bank should cope with this problem as it was an area outside her jurisdiction yet she said she recognized the problems of the exporters.
Among the bankers and business executives who attended the meeting were (i) Zubyr Soomro of Citibank (ii) Qasim Parkeh of Metropolitan Bank (iii) Naveed A Khan of ABN Amro Bank (iv) Moin M. Fudda of Commercial Union Insurance (v) Mushraff Hai of Lever Brothers (vi) Humayun Murad of Orix Leasing (vii) Tawfiq Chunai of International Industries (viii) Mian Abdullah of Safire Textiles (ix) Kamran Mirza of Abbot Laboratories and S.M. Salim.
Our Staff Reporter adds from Islamabad: The World Bank is considering to increase Pakistan’s annual concessional lending under International Development Agency (IDA) from $350 million to $500 million.
Official sources said that World Bank Vice President for South Asia Ms Mieko Nishimizue who arrived in Karachi on Thursday will reach Islamabad on Friday to hold wide-ranging discussions with Pakistani authorities on the bank’s increased lending for Pakistan.
Sources said that Ms. Nishimizu’s visit was very important in the backdrop of September 11 events that seriously affected Pakistan’s economy.
Pakistan is a blended country for IDA/IBRD assistance of the Bank. IDA assistance is a highly concessional window of the World Bank that carries only 0.75 per cent service charges and loaning for 35 year period with 10 years grace period.
