ISLAMABAD, Feb 1: The International Finance Corporation (IFC) has said that Pakistan’s balance of payment position remains fragile and foreign investment modest, although economic indicators have improved.

In its annual report 2001, the IFC also said that economic growth in South Asia was fast by world standards, but the economies were still not vigorous enough to address the needs of the one-third of the world’s poor who live there.

“The unstable political environment, uncertain fiscal and regulatory conditions, inadequate infrastructure, and slow pace of reforms impede growth in South Asia,” the report added.

On the positive side, export growth is driving economic recovery in Pakistan and Bangladesh and sustaining growth in India and Sri Lanka. Even these bright spots, though, are threatened by an economic slowdown in the United States and Europe.

Pre-election concerns in Bangladesh and civil strife in Sri Lanka slowed the reform process and damaged investors confidence. Nevertheless, those economies saw strong growth of around 5.5 per cent in 2001.

“Political and financial scandals have damaged investors confidence in India, but business-oriented policies and an ambitious privatization programme underscore a commitment to reform,” the report said, adding that annual growth of India was expected to remain around 6 per cent.

“In south Asia our strategy is to support four areas. In the financial sector we are building strong domestic institutions that expand the range of services and deepen markets, especially for poorly served small and medium enterprises. We are supporting private provision of infrastructure, including privatization of public utilities and the creation of new infrastructure. We are promoting restructuring and modernization of manufacturing and service companies to help them meet the challenges of globalization. Finally, we are making selective investments in the private sector for provision of health and education to improve quality and access,” the report said.