World Bankassessment on Pakistan economy


Aug 12 - 18, 2002

The World Bank has published the Country Assistance Strategy (CAS) for Pakistan, the document which provides the roadmap for the institution's assistance to Pakistan for fiscal years 2003 to 2005.

The CAS is an exercise which is undertaken by the World Bank every two to three years, to design a work plan to guide its operations in support of its client country. This work plan is detailed in a document called the "Country Assistance Strategy" or CAS. In its final forum, the CAS document describes all of the Bank's planned operations in the country lending, analytical work, and technical assistance for the time period covered by the CAS usually three years. The CAS presents a realistic assessment of the challenges and major risks Pakistan's economy faces, most importantly the sustainability of the government's reform programme and the challenge of implementation.

The CAS for Pakistan was prepared following extensive consultations with members of the civil society in the country to capture the aspirations of ordinary Pakistanis across a wide spectrum. It was discussed by the Board of the World Bank in June. The CAS was also shaped by lessons learned from the implementation of the previous CAS in Pakistan (1995) and the results of the 2000 Client Survey, claimed a spokesman of the World Bank in Pakistan.

The new CAS focuses the World Bank's programme in support of Pakistan in three areas. One, strengthening macroeconomic stability (including a sound debt reduction strategy to restore creditworthiness, reduce reliance on international financial institutions) and government effectiveness; two, improving the business environment for growth; and, three, improving human development and equity through support for pro-poor and pro-gender policies.

The CAS identifies three lending scenarios for Pakistan. The equivalent to US$ 400 million per year is the IDA (International Development Association, the interest-free arm of the World Bank Group) allocation for the base case scenario and the equivalent to US to US$600 million a year for the high case over FY 03-05. In a high-case lending scenario, the Bank would resume International Bank for Reconstruction and Development (IBRD) lending from FY 04. These lending scenarios will be guided by two sets of triggers, one linked to provincial reforms another to each of the three pillars of the assistance strategy: macroeconomic stability and governance, an improved business environment for private investment, and advances in human development.

Non-lending services such as policy dialogue, advisory services, research, and sharing of knowledge and international experience will be used to support the Government of Pakistan's Poverty Reduction Strategy Paper (PRSP) process. In addition there will be a focus on strengthening governance reforms at both the federal and provincial levels, and supporting capacity building and knowledge sharing.

To mitigate the implementation risk, the Bank and other donors are working together with the government to build government's capacity at all levels. However, in its engagement with Pakistan over the past two and a half years, the Bank has been impressed by Pakistan's commitment to its reform agenda. Nonetheless, the CAS underlines that substantial lending will continue only as long as this commitment remains firm.

Besides providing details of lending scenario, the CAS offers material information which warrants government attention. The areas focused include government in effectiveness in some vital areas. According to the document the breakdown of law enforcement and the judicial system in parts of Pakistan has had severe consequences for the whole society. It also refers to the defective inspection system involving large numbers of petty officials who have been authorised to license businesses, monitor utility meters, inspect premises to check for violations of health and labour regulations, impose highway tolls and assess taxes. It commends the role of the army monitoring teams in certain cases.

The CAS also underlines another important issue which the government needs to take note of. According to the document the investment regime is still not business-friendly. It maintains that "inconsistent policies and Predictability, uncertainty over the implementation and timing of policy statements accountability and transparency remain serious problems." The insistence of the government on forcing its constitutional amendments package down the throat of the political parties and to debar certain leaders from elections would only introduce a strong factor of uncertainty about the future, which, is highly uncongenial for investment. There is a need, under the circumstances, to reduce the level of political tension by allowing all politicians to contest the elections. Similarly, major constitutional amendments should be left for the elected Parliament.