ISLAMABAD, Dec 7: The government has formulated an exhaustive Interim-Poverty Reduction Strategy paper that seeks to revive growth through improved efficiency and productivity across all sectors of the economy.

The strategy is based on achieving high growth, especially by attracting higher savings and investment.

“However, as foreign savings remain constrained, net resource transfers continue, and the government limits public investment due to its role as a facilitator focussing on meeting critical social sector requirements, the projected steady growth path may not be realized. In that scenario the country will need strong external support from the donor community in terms of exceptional funding and even debt reduction,” says the I-PRSP document, jointly prepared by the Finance Division and the Planning Commission.

The paper says that latest developments specially arising out of the Sept 11 terror attack on America, have the potential to unravel the macroeconomic framework. “Both the balance of payments and the budget are being affected. Apart from the likelihood of instability in the macro-economic framework, without filling the widened gaps, pressures will mount to cut expenditure including those aimed at poverty reduction, thus putting at risk the objectives of the I-PRSP. Accordingly, the poverty reduction efforts will be seriously undermined,” the paper added.

To prevent this, it is imperative that broad-based support is provided to Pakistan by the international coalition to meet the exigencies of the changed scenario, it says, and goes on to suggest the following countervailing measures to mitigate the situation:

1- The additional expenditures (defence and law enforcement) have to be met through appropriate grants to the budget so that existing allocations are protected, particularly those in the poverty-related areas; 2- The burden of additional refugees has to be met outside the budgetary framework, from contributions from the international community. However, to avert the possibility of a major slow-down in Pakistan’s economy, a provision for local procurement of goods and grains from Pakistan (with a surplus wheat crop) is critically needed;

3- To stem a decline in exports, free access to G-7 markets of Pakistani exports, especially textiles, is imperative;

4- A combination of additional fiscal space (through a relatively relaxed deficit target) and significant relief in the debt burden (through deeper concessions in the Paris Clubs and bilateral write-offs) will be required to sustain the revenue losses and ensure the viability of the medium-term macroeconomic framework.

The Paper said that meeting the resources required for reaching the PRPS targets, would be a daunting task in the presence of huge debt servicing payments. The costing exercise will reveal the extent of donors support that will be needed to supplement government efforts at reviving the economy and reducing poverty. It will also highlight the need for significant exceptional assistance for generating the requisite resources to support the PRSP process.

It is, however, envisioned that the full PRSP will be finalized when the elected government takes over after national and provincial elections to be held latest by October, 2002.