Realising Pakistan's economic potential

Fifteen months ago, Pakistan stood on the brink of a financial crisis. During a time of unprecedented turmoil in financial global markets, Pakistan's unsustainable fiscal policies, made worse by the world-wide spike in food and fuel prices, produced a dangerous set of consequences: accelerating inflation, a collapse in the rupee, and a profound downturn in the Pakistani economy.
Faced with difficult choices, the Government of Pakistan took courageous steps to avert the disaster. Implementing essential reforms and working closely with the IMF, the World Bank and the Asian Development Bank, Pakistan has secured a notable - albeit fragile - recovery. Inflation has fallen, the stock market has regained much of its value, and foreign exchange reserves have been replenished.
Pakistan's economic situation has stabilised, but during the current period, Pakistan must build the foundation for an economy that is not merely stable, but prosperous; an economy that provides the security, educational opportunities, health care and modern infrastructure.
As Pakistan strives to realise that promise, the United States is committed to being your long-term partner. To strengthen that partnership, we have made substantial financial commitments to support economic development, the expansion of the social safety net, and increased energy production.
In addition to the substantial resources the US has contributed directly and through the IMF and World Bank, we have also committed our best resource - our people. Complementing the work of US professionals already providing development assistance in Pakistan, the US Treasury Department advisors will soon begin providing technical assistance to the Ministry of Finance and the Central Bank.
Through these professionals, we hope to help Pakistan develop the tools to become financially independent by strengthening revenue collection, debt management, and capital markets - and by increasing the transparency of the financial system. In my meetings with senior officials in Islamabad today, the economic challenges facing Pakistan will be at the core of the agenda.
We will discuss the importance of maintaining momentum on key economic reforms - in particular: increasing tax revenues and reforming the electricity sector. Every government needs the ability to raise sufficient revenue to finance the services its people need.
The international community helped shore up Pakistan's government during a period of extraordinary difficulty - but the people of Pakistan must now do their part. No one likes to pay taxes, but with Pakistan's revenues representing less than nine percent of the GDP, Pakistanis pay less for their government than any other country in the region. To balance its budget and invest for the future, Pakistan must begin to raise domestic revenues.
Enacting successful value-added tax (VAT) legislation in Parliament will be a critical step toward Pakistan's financial independence. Just as reliable revenue collection is an essential element of effective governance, sufficient and reliable supplies of electricity are vital to economic growth.
Today, chronic blackouts darken the lives of ordinary Pakistanis, cripple business and prevent Pakistan from reaching its potential. We welcome the government's decision to raise electricity tariffs in October and January and for their commitment to bringing tariffs to levels that cover the costs of generation and distribution.
Naturally, price increases must be accompanied by investments in improved generation and distribution. But much-needed private investment in the energy sector will only occur when investors can see that power companies are allowed to charge for their costs.
Like any nation, Pakistan is the driver of its own destiny. Challenges will inevitably arise - oil price fluctuations, international demand disruptions, and security disturbances. But every step toward reform is a step away from vulnerability and dependence on foreign assistance and a step toward stability, opportunity and prosperity. In continuing on this road, the people of Pakistan will have a steadfast partner in the United States. (The writer is US Deputy Treasury Secretary)