ISLAMABAD, March 17: The multilateral donors on Wednesday asked Pakistan to enhance revenue collection, reduce subsidies and public sector losses, increase public sector development programme and increase funding to the provinces under the National Finance Commission (NFC).
Speaking at the first session of the three-day Pakistan Development Forum (PDF) meeting, they also called for enhanced investment in the human development, social justice and improvement of legal system and delivery of services to the people.
Mohsin S. Khan, Director Middle East and South Asian Region of the International Monetary Fund (IMF), said the government should focus on improving human capital, enhancing efficiency of allocation and upgrading the social service delivery system.
He said that Pakistan would have to increase its tax collection and reduce subsidies and losses of the public sector enterprises, particularly in Wapda and the KESC if it wanted higher growth on a sustainable basis.
He said additional fiscal room thus achieved would be in the region of 1.5 per cent to 2.5 per cent of GDP which should be used for development spending. He said the government should set a more ambitious target of tax collection and "further reforms in power sectors are direly needed."
He said through the devolution plan the public services efficiency should be enhanced at local level. They should be made accountable. The decision of Pakistan to leave IMF programme was welcome but the relationship would continue as IMF would continue reviewing its economy and offering technical assistance in monetary and fiscal reforms.
He supported the PRSP approved by the Pakistan government and said it provided solid framework for future reforms. He said that to maintain 5-6 per cent GDP growth target was an ambitious plan but achievable.
There would be a great need to enhance both public and private investment while maintaining fiscal stability, he added. He said settlement of the LFO issue and peace with India "are welcome signs" for the economy but continuity of economic policies and a further cut in debt "is desirable."
He said there was a need of reducing the cost of doing business, easing tax regulations, introducing more deregulation in the economy, labour market reforms and power, telecom and irrigation sector reforms.
Praful C. Patel, the World Bank vice-president for South Asia region, praised Pakistan's economic performance over the last few years but said more than one-third of the nation's population was still poor.
He said Pakistan's social indicators lagged behind countries with similar per capita incomes and the government should respond to the aspirations of the people for a better future for their children and even for themselves.
Mr Patel called for increasing funding to the provinces through NFC and through provincial finance commission mechanism, although PRSP has projected higher budget allocations for pro-poor expenditures.
He said investing in infrastructure was key to sustaining growth and increasing the delivery of services to the poor. Access to water, electricity, sanitation and transport will all need a real increase in infrastructure coupled with institutional reforms, particularly in the water and power sectors. He also called for regional and international integration through SAFTA, WTO and multilateralism.
He also suggested increase in investment levels for higher productivity, lowering the cost of doing business, bringing taxes down to a uniform level, removing restrictive regulations, removing bureaucratic hassles and creating an environment that allows an ordinary Pakistani family to prosper by making and selling goods and services.
Asian Development Bank's vice-president Liqun Jin stressed the need for further streamlining the project implementation and their proper monitoring for enhanced growth on a sustainable basis.