KARACHI, March 4: The government has reassured IMF that it would focus on poverty reduction policies and programmes “without compromising macro-economic stability”.
In the quarterly progress report on poverty reduction submitted to the Fund, the authorities have, on the other hand, claimed that as opposed to the past policies the poverty issue has taken “the centre-stage of the country’s macro-economic policy framework”. The report says that poverty reduction is no longer considered as “a by-product of growth process”.
The report on “Pakistan: Poverty Reduction Strategy Paper (PRSP)” came out along with the IMF press release on fourth review of Poverty Reduction and Growth Facility (PRGF) supported programme on Saturday.
“The government is raising its pro-poor budgetary expenditures by at least 0.2 per cent of the GDP per annum as against the past budgetary performance that shows that pro-poor expenditures declined by 0.25 per cent annually between 1995 and 2000,” says the quarterly report.
In its own review, the IMF, however, points out that “pro-poor expenditures, while lower than expected, rose significantly during the first half of the current fiscal against comparable period last year. The Fund did not quantify the significant change.
The IMF has criticized the non-priority spending and wants subsidies to be reduced to free resources for “priority social and capital expenditures”.
The Fund sees costly sterilization (through intervention by the State Bank in foreign exchange market) as non-priority expenditure. It wants Wapda losses to be contained. It wants the central bank to slow down the pace of the SBP’s foreign exchange purchases that would help contain money growth and reduce the need for costly sterilization.
According to some estimate, the SBP’s anticipated profit of Rs26 billion for fiscal 2003 would be wiped out if the sterilization continues. The State Bank has been actively intervening in the foreign exchange market to manage a gradual appreciation of the rupee for the benefit of exporters.
The sterilization cost, thus saved, could be spent on the poverty reduction programme, say some critics, instead of subsidizing exporters.
The overall PRSP expenditure, says the quarterly report, grew by 39 per cent during July-September 2002 from the last year’s corresponding period, rising in absolute terms from Rs21 billion to Rs29.3 billion.
NWFP emerged the best performer with 110 per cent utilization of pro-poor spending, followed by Punjab with 27 per cent. The poor in Sindh and Balochistan were the worst hit where spending declined by 13 and 8 per cent, respectively.
The government has marked Rs161 billion for 2002-03 the PRSP programmes, up by 20.6pc against last year’s allocation. The “pro-poor spending” for the quarter under review, as compared to the same period last year, increased as follows: water supply and sanitation 16 per cent; education 26 per cent; health 44 per cent; population planning 223 per cent; natural calamities 542pc; irrigation 38 per cent; land reclamation and rural development 37 per cent.
The interim-PRSP has been the first step towards targeting multi-dimensional nature of poverty and human development. The full Poverty Reduction Strategy Paper is expected to be finalized by June. However, PRSP, say officials, would need a mechanism for periodical updating, either on annual or medium term basis, to reconcile it with emerging socio-economic realities and improvements in service delivery as the data from various surveys and agencies keep pouring in.
The poverty reduction programmes are handicapped by inadequate utilization of allocated funds and poor delivery system.