World Bank's advice on development issues

Pakistan should focus on a wide range of critical development issues, including health, education, skill development, social mobilisation as well as on building important infrastructure to meet its future growth requirements, a statement issued by World Bank Vice President for South Asia, Ms Isabel Guerrero has said.
Her remarks come against the backdrop of the recent Friends of Democratic Pakistan (FoDP) conference held at Tokyo at which funding of more than $5 billion was pledged by the international community, essentially to meet Pakistan's immediate economic needs for strengthening its human development initiatives.
The Bank says that despite unmistakable signs of overheating of the economy two years ago, and the additional food and fuel price shocks of last year, the government's policy responses to address the issues remained "inadequate", which is certainly an understatement.
However, according to the Bank, the new government has taken robust stabilising measures and entered into a $7.6 billion IMF Stand-By Arrangement, which remains on track. The statement commends Pakistan for protecting 25 percent of its poorest citizens. Social spending in areas like education and health has been shielded and what was achieved at Tokyo was to raise the shield even higher with an additional over $5 billion funding.
The statement adds that the donors' sideline evaluation of GoP's ongoing 9-point economic reform agenda has lent credence to the scale of robust efforts Pakistan has undertaken in core economic areas like macroeconomic stabilisation, social protection, agricultural reforms, industrial competitiveness, human resource development, integrated energy generation plan, capital market reforms, public-private partnership and administrative reforms, among others.
The deficiencies the World Bank report has pointed out essentially relate to social, energy and infrastructure, with the neglect of agriculture and manufacturing sectors having played even more critical role in generating the crisis the country is today caught in.
Prolonged current account deficit, unchecked inflationary trends, the widening of income inequalities and degradation of some crucial national institutions has served to blunt the impact of any development programme the governments in Pakistan have initiated. Incidentally, good governance implies a capacity to turn public income into human development outcomes, in which we have failed.
It is also an essential pre-requisite for pro-people growth as it establishes an enabling regulatory and legal framework essential for a sound functioning of land, labour, capital and other markets. Inadequate skill development facilities in Pakistan are an important factor that has substantially contributed to the increase in poverty in the country.
Therefore, a much larger budgetary allocation needs to be made for developing a workforce that is skilled in modern production methods. Secondly, Pakistan's labour force is expanding at the rate of 2.4 percent. This growth should be put to a more productive use. Thirdly, there is the problem of higher CPI inflation due to strong food inflation, which is a direct result of gross neglect of agriculture sector.
Inflation can have a number of adverse consequences for the economy: it erodes purchasing power of the population and leads to a contraction in economic growth. Linked to it is the increase in macroeconomic instability because an inflationary environment generates many uncertainties. Above all, inflation can damage a country's competitiveness by resulting in increased cost of production in local currency, and a consequent overvalued exchange rate, which makes a negative impact on the country's exports.
In fact, there has been a steady decline in Pakistan's agriculture sector yield since 1949/50 when it was by far the strongest sector of the economy with a contribution of over 53 percent. However, by 2002-03 it was down to only 23.6 percent ie less than even one-quarter of the GDP. As agriculture sector is the best poverty alleviator, its share in the budgetary allocation should be substantially increased, to bring down food inflation.
The government should ensure availability of agricultural inputs to the farmers at competitive rates. It should also arrange field training of farmers in different varieties of soil as no uniform fertiliser can be used for all types of soil. Timely availability of credit too is as important as its quantum.
Viewed in the overall perspective, Pakistan cannot achieve progress without putting most emphasis on developing a knowledge-based economy, which is extremely crucial in the globalised world of today. The existence of a yawning "knowledge gap" has hampered our progress.
As a result Pakistan has lagged behind even some of its regional contemporaries in developing and exploiting the human capital. This lack has in turn served as a strong restraint on the country's progress and development. Fortunately, globalisation has demolished the barriers that had formerly blocked or impeded social or academic interaction among states.
As the country has been saddled with some of the lowest indicators in education, health and infrastructure sectors, the government should put renewed emphasis on these sectors. By the way some 632 projects worth Rs 2.36 trillion, including 394 in infrastructure and 200 in social and other sectors are said to have been approved in eight years of the last government. What is the current status of these projects?
Have the projects been executed, partially executed and abandoned? Further, what about the budgetary allocations made for them? Have these been utilised, partially utilised or not utilised? If not utilised, where is the money currently parked? The government should retrieve the unutilised money and allocate it anew in projects of critical importance to the country.
The biggest cause of our national problems is that successive governments have shown an unhealthy propensity to spend more than they earned. This has resulted in the incremental piling up of fiscal deficit. Hence the need for us to go cap in hand periodically to seek additional bailouts. The World Bank's advice on revival of economy needs to be heeded and expeditiously implemented by the government.