The World Bank is initiating analysis of Pakistan's budget data, including execution of projects under Public Sector Development Programme (PSDP), revised estimates for fiscal 2004-05 and fiscal and external sector projections for fiscal 2005-06," well placed sources in the Finance Ministry told Business Recorder here on Thursday. "A full set of budget compendium has been provided to the bank with revised estimates for 2004-05, including data on key subsidy/tax expenditure items, PSDP execution data, besides fiscal and external sector projections for the next fiscal. "Poverty Reduction Support Credit II (PRSC-II) documents are also included with an updated macroeconomic framework," the sources said, adding that a bank's team has reached Islamabad to start review of Pakistan economy.
The World Bank mission, the sources said, had given deadline to ensure fulfilment of all prior actions by end-April to ensure that appraisal and negotiations could take place in May so that disbursement should take place by the IDA board in July 2005 as requested by the government.
The areas include power sector reforms, revision of labour legislation, pay and pension reforms, strengthening of safety nets and incentive-based programmes to accelerate improvements in health and education outcomes and approval of a new national Water Policy.
The bank forecasts 6.6 percent to 7.2 percent economic growth in the ongoing fiscal, whereas it has been informed that overall fiscal deficit target (before grants) was expected to remain at 3.2 percent of the GDP, which was consistent with the macroeconomic framework in the PRSP and supported under PRSC programme.
For the fiscal 2005-06, the bank has been informed that the government intends to maintain deficit target broadly at the level of 2004-05 GDP, which would allow for a considerable expansion in overall public expenditures in priority areas, including public investment and the transfer of increased share of fiscal space to provinces through the National Finance Commission mechanism.
The bank, the sources said, would also stress on tightening of monetary policy, as inflation was a highly regressive tax that reduces the income of poor disproportionately. The bank was also pointing out the importance of remaining vigilant regarding the impact of expanding credit on the health of Pakistan's rapidly expanding banking sector.
World Bank Country Director John Wall in a letter to Finance Secretary Nawid Ahsan appreciated the efforts initiated by the government for PRSC-II, saying there has been good progress towards achievement of several PRSC-II programmes since the last visit of the full team.
He, however, observed that there were a number of areas where intensive work was required which was necessary for disbursement in July as requested by the government.
The sources said that the bank's budget mission would stay in Islamabad for a few weeks and may also provide technical support on the NFC issue.