World Bank Vice President, Praful Patel told the inaugural session of Pakistan Development Forum that the twin challenges in this year''s PDF theme are sustaining growth and improving the quality of life for all citizens. Patel in his address said that Pakistan''s infrastructure should support a modern and efficient economy. "This meant reliable, affordable power supplies for industry and driving down the fiscal costs, which required substantial investment in the water sector and institutional reforms to underpin this investment for more accountable, transparent and financially sustainable systems of irrigation, water supply, sanitation etc."
Unsafe roads, urban congestion, poor rural mobility, inefficient railways and costly port operations will all take substantial investment, the WB vice president said.
He said Pakistan needed a business environment to match the challenges of today''s world. For this to happen, the country has to drive down trade protection, lower the burden of government bureaucracy, improve labour market flexibility and tax administration.
To reduce poverty, Patel stressed the need for rural development, including opportunities for electrification, finance for the poor, modern technology for the farmers and market-friendly climate for small and rural entrepreneurs.
He added that improving the quality of life of citizens required significant and effective investments in human capital as sustained growth is built by strong, healthy and educated people. For this Pakistan needed to dramatically increase its investments in its people. While there is substantial increase in poverty-related expenditures, like education and health, there should be bold action on several fronts like marshalling NGOs, private sector and government in promoting education services and also confronting teacher absenteeism.
Patel said the local governments must be empowered to deliver services like health, education and water and sanitation and added that further administrative and fiscal devolution would drive increased accountability.
"Further devolution will ensure that the additional resources get into the hands of those responsible for delivering services."
It is expected, he said, that Provincial Finance Commission Awards will pass a greater share of resources to the provinces and districts.
These important matters need our full support - both financial and technical, the WB vice president said, adding they also need government, donors, NGOs, and business shoulder to shoulder.
IMF EXECUTIVE LISTS CHALLENGES: While lauding Pakistan for success of its economic policies and performance, IMF executive Mohsin S Khan, Director, Middle East and Central Asia Department, has listed several challenges to the continuing growth, and how to meet them.
Among these are: reduction of poverty to 13 percent by 2015; containing inflation by further tightening of monetary policy; maintaining a fine balance between reduction of debt burden and increasing social spending; improving revenue-GDP ratio by taxing agriculture and services sectors; and maintaining budget deficit at 3 percent.
He observed that Pakistan Millennium Development Goal to reduce poverty to 13 percent by 2015 was "ambitious, but feasible". This, he added, would require continuation of policies for accelerated growth and strengthening of business environment. The IMF executive called for further tightening of monetary policy, "lest harsh measures become inevitable later", hurting Pakistan''s competitiveness.
With regard to fiscal policy, he counselled need for maintaining balance between reducing debt burden and increasing social spending. According to him, public and private debt burdens are already quite high.
Mohsin stressed the need for not exceeding the budget deficit to go over 3 percent in the coming years to meet the public debt-to-GDP ratio to about 50 percent by 2008-09.
He called for raising the share of tax revenues in GDP, as the present level of 11 percent is inadequate. "We encourage the government to set more ambitious revenue goals. For this, the government needs to do more in the agricultural and services sectors rather than reducing too much the tax rate for the manufacturing sector in the hope of boosting growth."
He said that petroleum levies should be returned to the earlier levels, as subsidising petroleum prices is economically inefficient and socially ill-targeted.
Another prescription of IMF executive--repeatedly pressed by donors--is to reduce drain on the budget by transfers to various state-owned entities. The most prominent are the in the power sector, which amount to nearly 1.5 percent of GDP.
While he noted that sale of the power entities was on the cards, a new regime for electricity tariffs and subsidies has yet to come into effect.
He said that last but not the least Pakistan needs to complete the second-generation structural reforms agenda to create an environment in which private initiatives can flourish.
He said that supervision and regulation of stock market needs to be strengthened further to reduce the possibility of the type of bubble and subsequent correction that occurred recently.
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