With forex reserves of over $12 billion, Pakistan would not need balance of payments support after the current three-year IMF Poverty Reduction and Growth Facility programme ends next month.

Officials are firm that they would not seek any new loan from the Fund though the shining external sector of the economy is losing some of its gloss. Instead economic managers are looking for enhanced volume of soft developmental loans from other international financial institutions and stepped up bilateral official assistance from industrialized states.

Even, the new multilateral and bilateral loans created in fiscal 2003-04 for building badly needed infrastructure are more than double the private foreign investment officially put at $950 million.

Efforts are being made to improve governance to ensure that foreign aid is absorbed quickly and investments yield enough returns to repay loans and avoid pitfalls that earlier led Pakistan to a debt trap. The capacity building of the administration is being enhanced and training of civil servants is being undertaken with the World Bank's assistance.

Presently, there is a big time lag in pledge, commitment, disbursements and actual utilization of foreign loans. Projects funded by external debt take more time to be implemented than those locally financed.

The delay leads to cost over-runs including payments of commitment charges to the lenders on non- utilized money. Hence, all commercial contracts under the World Bank loans have a provision for adjustments in inflation-adjusted costs.

Despite so much rhetorics about transparency, the huge commitment charges for loans and credits in the pipeline and the premium that is paid to the lenders on pre-payments of loans is not disclosed.

Credit for whatever transparency is evident on the domestic economic scene goes to the international lending agencies. It is time for the World Bank and the Asian Development Bank to take the initiative to reveal the commitment charges they receive from the government on non-utilized funds so as to build pressure for early execution of projects.

Addressing the 2004 annual meetings of the World Bank and the IMF last week in Washington, Dr Salman Shah, Advisor to the Prime Minister on Finance and Economic Affairs sought "substantially much bigger envelope" from the World Bank group including the IDA, the IFC and the MIGA to "sustain the momentum going into the second generation of reforms."

The government is seeking $872 million project assistance from the World Bank for fiscal 2004-2005 but Dr Salman Shah wants the WB group to" mobilize substantial incremental resources".

The State Bank figures show that disbursement of foreign economic assistance during July-April 2004 declined by 25.7 per cent to $719 million mainly because of sharp contraction of assistance including project aid from the World Bank and the Asian Development Bank.

Incidentally, the World Bank has just announced $300 million Poverty Reduction and Support Credit for improving governance and investing in human capital development; to empower the vulnerable/marginalized and to bring them in the mainstream of economic development.

The PM's advisor on finance also laments the negative transfer of official resources from the multilateral development financial institutions to their borrowers. Net disbursements have turned negative in case of the World Bank group in the last two years at a time when there are enormous needs for infrastructure finance and other capital investments in their client countries.

Official figures show that during 2000-04 the total debt, principal and interest payments, by Pakistan exceeded by over a billion dollars disbursement of all official grants and loans (public and publicly guaranteed loans).

Pakistan is seeking water project funding from the World Bank. Press reports indicate that a proposal of $5 billion loan for a period 7-8 years may soon crystallize. Economic managers were recently seeking loans ranging between $20-25 billion.

However, the Asian Development Bank has raised lending by a quarter billion dollars to $1.96 billion for infrastructure development for two years 2005 and 2006. It follows the pre- payment of $1.17 billion debt in January this year to ADB under the official policy to retire expensive debts.

Dr Salman Shah is also not satisfied with the level of official development assistance (ODA) by industrialized states. As the developing countries continue to strengthen their macro- economic framework and deepen the process of painful structural reforms, he regrets that "ODA levels have increased only marginally" and are stuck around $50 billion.

The ODA target of 0.7 per cent of the GNP of developed countries, set 34 years ago, has not been met. The current financial gap estimated at $50 billion in meeting the Millennium Development Goals by 2015 remains unbridged.

Pakistan's external debts, though still high, has declined appreciably as a proportion of GDP as a result of debt re-profiling, low interest rates and repayment of some of the expensive public and private sector debts.

In fiscal 2003, $1 billion of debt was written off by the United States. Officials say that this has enhanced their capacity to borrow. It also indicates a growing appetite for foreign loans.

Yet, the Standard and Poor sees Pakistan's debt/GDP ratio as among the worst for all rated sovereigns. As on March 2004, the public and publicly guaranteed debt was $30.185 billion against $28.3 billion at the end of June 1999.

Social Policy and Development Centre estimates that a new debt of at least over $2 billion was created in fiscal 2003-04 as is evident from the rise in public sector borrowings/government guaranteed loans by $0.95 billion over the year despite early payment of $1.17 billion debt to the ADB.

The debt office in the ministry of finance plans to retire $4.5 billion of expensive debt to the World Bank, the IMF and the Asian Development Bank: another $1.5 billion in FY2005 and $2 billion in FY 2006.

The WB has also asked Pakistan to improve its debt management by setting up an independent and separate debt office for timely risk assessment and risk management. Pakistan is one of the 12 countries which has been selected by the WB to a detailed evaluation of debt management practices and institutional arrangements.

The World Bank decision follows a number of risks to Pakistan's external sector which is emerging from global economic and fiscal developments. The movement towards the higher interest rate means costlier loans. It has also implications for the private capital flows to the periphery countries like Pakistan.

Among the medium-term risks, Dr Salman Shah told the IMF/WB annual meeting, perhaps the most significant is the perverse direction of official capital flows, in the form of accumulating dollar reserves, that is the counterpart of growing US external and fiscal imbalances.

The large and persistent payments imbalances in major industrialized countries create risks of disorderly exchange rate and interest rate movements; together these factors generate a high degree of uncertainty that is inimical to the prospects for investment revival in several regions of the world.

No less important for the private sector led sustainable growth and poverty reduction in the developing world is the issue of market access. Unless the developed world allows market access and reduces significantly trade-distorting subsidies, developing countries would continue to be vulnerable to debt crisis.

Dr Salman Shah laments that the needed level of official development assistance is not forthcoming. Market access is denied. Much of the promises which the developed world makes to the developing countries remain unfulfilled. It is rhetoric par excellence.