Softening the hardship

The Dawn Asia News Network Karachi

Pakistan cannot achieve a double-digit growth rate, which the International Monetary Fund executive director Abbas Mirakhor said it has the potential to realize, or contain rising poverty, about which the head of the IMF review mission Milan Zavadjil appeared appropriately concerned, by continuing the policies of the last three years. The IMF officials' comments came at the end of the visit by the fund's review mission to Pakistan.

Assisted by the fiscal space created by the Paris Club's generous debt rescheduling granted in December 2001 and the not- as-generous U.S. payoff for our help in its war against terrorism, the country's managers were able to introduce reforms postponed over the past several years because of the absence of a financial cushion to soften hardship that follows such reforms.

However the private sector had continued to drag its feet, thereby causing overall poverty to deepen and widen further.

For the same reason the growth rate too could not go beyond 5.1 percent. And it is likely to remain stagnant at around 5 percent to 5.5 percent if the government continues keeping a tight leash on public spending, specially on education, health and the physical infrastructure, in the hope that the private sector will one day wake up to its responsibilities.

This is not going to happen because of the very nature of the private sector here which has made its riches in an environment of concessions, incentives and protection.

Our economic managers must thus review their policies and use the fiscal space which the country still enjoys in the shape of $11 billion in foreign exchange reserves, high export and revenue growth and low inflation, to expand public development expenditure aimed to create jobs and human resource development while pressing on with the reform agenda.

It is a matter of great satisfaction that Pakistan has reached a stage when it does not any more need the crutches of the IMF whose help carries a lot of debilitating conditionalities.

Pakistan's risk rating in the capital market has consequently improved greatly, enabling the country to mobilize resources without conditionalities at highly economic rates by floating bonds in the international commercial market.

These resources and concessional assistance from the World Bank, the Asian Development Bank and bilateral donors for which we still qualify, should be used not only to build up reserves but also to accelerate the rate of overall investment from the current 15 percent-16 percent to 21 percent-22 percent.

This is simply not possible without expanding public sector investment from the present 4.5 percent to at least 8 percent-9 percent of gross domestic product. It is only then that the domestic and foreign investor would find it profitable to invest in this country and enable conditions to be created for an improved growth rate and poverty reduction.