PDF approbation and concern

During the customary annual two-day conference of Pakistan Development Forum held in Islamabad, multilateral and bilateral donors reaffirmed their pledge to assist Pakistan in achieving the Millennium Development Goals (MDGs). There are a total of eight rather ambitious time-bound and quantified MDGs focused on addressing extreme poverty in several dimensions, including income poverty, hunger, disease, lack of shelter, exclusion of women, education, and environmental sustainability.
While the Pakistan government may be tempted to explain donor support in terms of the success and, thereby, international approval of its economic policies, yet this support is, in all probability, more reflective of serious concerns about Pakistan's slow pace of progress in achieving the MDGs. Government statistics have revealed that poverty is on the rise - a key MDG - a revelation that has raised concerns within the international donor community. Additionally, it has been accepted by the government that inflation is on the rise.
Prime Minister Shaukat Aziz announced the setting up of a 12-man committee to check inflation last month, but this committee, empowered to check inflationary pressures due to racketeering, is unlikely to raise the confidence of the donors seeking tighter monetary policy as a more effective tool to combat a rise in prices.
However, the recent decision of the State Bank of Pakistan to raise interest rates by 1.5% would have, without doubt, provided a source of comfort to them. Be that as it may, there is evidence that the economy continues to overheat and in the words of the International Monetary Fund's Regional Director "higher price and wage pressures, combined with limited exchange rate flexibility, as witnessed since the beginning of the year, could eventually hurt Pakistan's competitiveness."
Economists argue that the Prime Minister's focus on growth above all else is also contributing to inflationary pressures and that the main victims of this approach are the poor which explains why poverty has been on the rise since the Musharraf government took over power.
Next, the two high profile rape cases in recent months have received considerable international coverage and raised doubts about the Pakistan Government's claims of promoting gender equality. Other laws that undermine gender equality continue to remain on the statute books and it is a source of concern that the Government has not yet taken any effective steps to annul them.
In spite of these concerns there is multilateral and bilateral confidence in the economic indicators of the country. Growth is buoyant, even though key indicators appear to have taken a beating in recent months largely attributed to external factors.
The rise in the international price of oil has reversed earlier significant gains in the trade balance. Critics of the Government allege that part of the fault can be laid at the Prime Minister's doorstep whose claims of having reached the developmental take-off stage resulted in the Saudi withdrawal of the subsidised oil facility that had traditionally been provided to Pakistan. In addition, the untimely floods during the first quarter of 2005 have also impacted on the economic fundamentals of the country.
At the same time the government's commitment to public sector reform, including governance reforms, as well as its thrust to move towards public-private partnerships in the provision of infrastructure given the paucity of state finances, finds ready listeners amongst the donors.
The identification of key goals as outlined in the Medium Term Development Framework (MTDF) was also unanimously lauded by the donors during the proceedings of the Development Forum. Impressive though the MTDF document is in terms of setting goals, skeptics argue that these goals are not backed by adequate resources and represent a wish list as opposed to goals that are achievable.
There is thus evidence that the government is on the right path as far as some of its policies are concerned, but there is a need to revise other policies in the light of the external factors impinging on our economy as well as the rise in inflation and poverty levels. The Prime Minister must realise that a macroeconomic policy must always be flexible and able to bend to the new circumstances that it may face.