KARACHI, Dec 30: The State Bank wants the elected government to implement the next phase of reforms instead of replacing the earlier reforms with populist policies.

Says the central bank in its first quarterly report of fiscal year 2002-2003: “The induction of the newly elected government has generated expectations in some quarters that fiscal discipline, institutional restructuring, social economic policies and good governance practices pursued during the last three years will gradually give way to more populist policies.

“This, if it happens, will be most unfortunate,” remarks the SBP report released here on Monday.

“The economy, having achieved stability, eased itself from the pressures of external sector payments and gained credibility in financial markets, and is now poised for takeoff towards higher growth, employment and poverty reduction.”

“But this will require that the ongoing reforms in CBR, WAPDA and KESC, and privatization should continue with vigour and seriousness and tax revenues are not frittered away on subsidies,” warns the report. “Instead we should implement the next phase of reforms where development expenditures on infrastructure, education, health water and sewerage, Khushali programmes in the districts, irrigation, water storage and conservation can be enhanced without fear of breaking the fiscal targets.”

At the same time, monetary and credit policy is being geared to channel banking sector resources towards agriculture, small and medium enterprises, housing, construction, consumer financing and micro-credit. These sectors employ the majority of labour force and have the potential of creating the highest number of jobs.

“Increased public sector investment and higher private sector credit to these labour-intensive sectors, and not budgetary subsidies are key to revival of growth, employment generation and poverty reduction,” the report concludes.