ISLAMABAD, April 9: Pakistan, which has enjoyed higher aid flows after declaring its support for the US-led war on terror, has a big opportunity to achieve sustained growth and reduce poverty, the Asian Development Bank (ADB) said on Tuesday.

For now, the bank predicts economic growth of about five per cent in the year ending June 2003 after an expansion of 2.5 to three per cent in the current year when growth was curbed by severe drought and falling exports related to a global slowdown.

Growth was 2.6 per cent in the previous year.

“If the government continues to follow sound macro-economic policies and to implement planned economic and governance reforms, it could fairly quickly achieve rapid and sustainable growth and poverty reduction,” it said in its annual outlook.

But Pakistan would remain caught between low growth and high poverty if it failed to implement the reforms.

“If increased aid flows are used to postpone the necessary reforms and macro-economic developments, as happened in the 1980s, Pakistan will be unable to break out of the existing vicious circle of low growth and rising poverty,” the bank said.

The bank said it planned to give around $1.0 billion in aid to Pakistan this year.

WORST OVER?/ Pakistan has cut its own growth forecast for the fiscal year ending this June to 3.3 per cent from four per cent, though Aziz told Reuters late last month it would be around 3.5 per cent.

But severe drought and falling exports have depressed the prospects for any marked improvement in the economy.

The ADB said a review of data from the first half of the 2001/02 year suggested Pakistan’s economic growth “is likely to be only slightly higher for the whole year than it was” in the previous fiscal year.

The ADB said the fiscal deficit was expected to be 5.3 per cent of gross domestic product (GDP), “if not higher,” because of the damage inflicted by the Sept 11 events.

The bank said the short-term effects of the US-led military action in Afghanistan on Pakistan’s balance of payments had been particularly tough.

It said falling exports also hit manufacturing and continuing uncertainty led to a further deterioration in the investment climate and effectively forestalled the proposed privatisation of Pakistan Telecommunication Corporation.

The farm sector was likely to remain slow because of pest attacks on major crops and acute irrigation shortages, it said.—Reuters