Economic performance of last year and its future
prospects were discussed at length during a two-day meeting of the
Pakistan Development Forum (PDF) 2005. Over 200 delegates both local
& foreign including representatives of donor countries, the World
Bank and the International Monetary Fund (IMF) attended the meeting.
Generally speaking, the overall performance
received appreciation especially the growth rate which expected to be
around 7.5 percent, through increased exports and other strong
economic indicators during current fiscal.
Representatives of donor agencies pointed out some
gray areas of the economy in some sectors and sounded a note of
caution for the economic managers to take immediate corrective
Mounting inflation, rising poverty level,
formidable shortage of water and power and inadequate infrastructure
were the areas, which they especially mentioned and offered assistance
to finance the plans to amicably meet challenges confronted to the
The Pakistan Development Forums (PDF) meeting is an
annual feature organized by Economic Affairs Division in coordination
with the World Bank. This significant forum provides an opportunity to
the government to share with its policies, reform agenda and
initiatives in areas such as poverty alleviation, human resource
development, governance and infrastructure development with the
Theme for current year was "sustainable growth
to improve quality of life". The PDF forum offers an opportunity
for free and frank discussion on economic issues with the objective to
reduce poverty level and achieve the targets enshrined in the
Millennium Development Goals.
In his inaugural address, Prime Minister Shaukat
Aziz told the forum that Pakistan was all set to achieve 7-8 percent
growth rate this year. We are making headway on poverty front as well,
however, with a few years of economic growth and right policies cannot
undo the follies of the decades.
Talking about more diversified and customized
approach to redress poverty, he said the government policies are
geared up towards high growth, infrastructure and private sector
development, improvement in service delivery, and good governance
aligned with the Millennium Development Goals (MDGs).
The government expects to achieve a 7 percent
growth rate during current fiscal year, while focusing at 7.5-8
percent growth rate for the coming year. "We need to grow at this
rate for the next couple of decades or more. We have to ensure that
all segments of the society, across geography, gender, class, caste,
religion, and any other divide were benefited of this growth.",
the PM said in a firm tone.
The Prime Minister told the participants of the
forum that the future growth strategy rests on five pillars; water
security, energy security, infrastructure development, human capital
development and second generation reforms. He also highlighted social
sector targets, which he feels would be achieved on medium term basis.
These include: universal primary education with 100 percent net
primary enrolment ratio; reducing infant mortality rate to 50 percent,
increasing fully immunized children to 90 percent; improving maternal
mortality ration to 180; and access to safe water to 84 percent of the
population by 2011-12. "We have set ambitious targets, but we
have to ensure that we are on our way to achieve the MDGs".
He, however, said that the country was faced with
tremendous challenges in the social and infrastructure sector.
Inflation and looming shortage of water & power were also causing
concern to the government, he added.
On the opening day of the conference, the
representatives of the World Bank, International Monetary Fund and the
Asian Development Bank addressed the forum. They usually acknowledged
that Pakistan's economy had turned the corner and it had been put on
the road to recovery and growth.
They, however, were of the view that infrastructure
improvement, social sector development and control over inflation were
the areas of critical importance. The interaction between
representatives of the government and the donor community leads to
creating awareness about the future economic strategy of the country
and the need for resources for fully implementing it.
Praful Patel, Vice President of the World Bank for
South Asia region said improving the quality of life for all citizens,
begins with sustained growth of 7-8 percent a year; with continued
macroeconomic stability; and with an improved investment climate. He
maintained that during the high or low growth periods of 80s and 90s
social indicators like literacy and school enrolment saw only small
changes, and large gender disparities remained untouched. "It is
how Pakistan's citizens at every level experience the impact of growth
that can lead to feelings of exclusion and deprivation. This in turn
undermines support for needed reforms. "He said Pakistan's
strategy for sustaining growth must address three key challenges;
Pakistan needs 21st century infrastructure, including reliable,
affordable power, supplies, substantial investment in the water sector
and a crack transport sector. He said money spent on inefficient power
sector is money lost to social spending; secondly Pakistan needs to
improve business environment by driving down trade protection,
lowering the burden of bureaucracy and regulation particularly for
SMEs, and improving labor markets and tax administration; thirdly, job
creation to reduce poverty mainly by focusing on rural and agriculture
He said Pakistan needs to dramatically increase its
investments in the people. "We celebrate the commitment to a
substantial increase in poverty related expenditures, like education
and health to 6.8 percent of GDP by fiscal year 2008." He said
local governments must be empowered to deliver services like
education, health, water and sanitation. Further devolution will
ensure that the additional resources get into the hands of those
responsible for delivering services.
The government's poverty reduction strategy
envisions pro-poor expenditures rising to 5.2 percent of GDP (under
the new base) from about 3.6 percent, by 2008. The strategy also
expects reduction in the population growth rate to 1.85 percent,
infant mortality rate to 63 per 1,000 births, literacy rate to 59.5
percent and lady health workers covering 85 percent of the population
by 2005-06. The government has also indicated to increase pro-poor
budget to 616.3 billion by 2009-10 from Rs278 billion now.
Liqun Jin, vice president of the Asian Development
Bank (ADB) also made similar assessment by saying: The medium term
growth prospect of 8 percent is achievable, but there are certain
challenges like the recent rise in inflation. He said the bank was
encouraged that the government and the central bank were taking steps
to contain inflationary pressure on the economy that has been
accentuated by the steep increase in international oil prices. Jin,
however, announced strong support to the reform agenda of the country,
and announced $3.6 billion lending program for Pakistan during
2006-08, including $2.7 billion for infrastructure development.
Jin expects the government to complete the
devolution process. "The reassignment of responsibilities has not
been fully achieved in some areas and this issue should be
ADB also expects the government to take a
pro-active approach to address issues relating to expenditure
transparency, accountability, governance and corruption. Jin said the
bank (ADB) also plans direct province based support for social sector
development, particularly focusing on the MDGs.
In an official presentation before the audience, it
was admitted that Pakistan faces major gas, electricity and water
shortage; hence it needed billions of dollar investment for building
up new infrastructure to avoid blackouts and food shortages.
According to official projections, the country
needs $12 billion investment within a span of 2005-2011 in the water
sector alone to overcome 17 million acre feet (MAF) water shortages.
It needs, at least, one trans border gas pipeline operational from one
of the three options by 2010 to avoid massive energy shortfall and
immediate upsurge in nuclear power to ensure sustained electricity
supplies at affordable price.
"We are short of water," the official
presentation said. The country where 64 percent of the population
depends on agriculture, its first implication would be more poverty,
it says. The water shortages in 2004 were estimated at 17 MAF, with
requirements of 124 MAF and availability at farm gate of just 107 MAF.
The per capita water availability is just 1,200 CM per year. By 2025,
the shortages would swell massively to 39 MAF, with a small 800 CM per
year per person water availability, rendering the country to the
unfortunate group of extremely water short countries.
The plan aims to invest Rs378 billion on
construction of new dams, Rs278 billion irrigation, Rs47 billion on
drainage and Rs6 billion on flood control. It means $12 billion new
investment during 2005-11, and a long-term projection of $33 billion
new investment requirements under vision 2025.
In the power generation sector, the official
projections show additional requirement of 7,880 MW by 2010 and a
total of 20,120 MW by 2015, as against the current installed capacity
of 19,540 MW. Major growth is being envisaged under nuclear,
renewable, hydel and coal fired systems to reduce dependence on
imported fuel oil.
"Pipeline gas should be available by
2010," the official forecast suggests, which projects a shortfall
of 3.21 million tonnes of oil equivalent (MTOE) by that time, which
would continue to rise in case there is no pipeline, out of the three
being considered, including Iran, Turkmenistan and Qatar.
The most worrisome and scary feature, besides water
shortages, appears to be the growing oil demand of the economy, which
is rapidly rising from 16.8 MTOE in 2005 to 20.7 by 2015, against the
limited indigenous supplies of 2.2 MTOE.
In the concluding session, World Bank and other
international donors reaffirmed their commitment that they would
remain strong and reliable partners of Pakistan to help in achieving
millennium development goals (MDGs). The participants of Pakistan
Development Forum 2005 gave loud and clear message at the concluding
session that their countries and organizations would extend full
cooperation to Pakistan for sustainable development in all key areas.
They listed social development, poverty reduction, health and
education, women empowerment, child and women rights which need more
focus in the coming years.
After the forum meetings, the Advisor to Prime
Minister on Finance Dr. Salman Shah along with Minister of State for
Finance Omer Ayub Khan announced that the government will institute
Khushal Pakistan Fund worth one billion dollars per annum for
improving living standard of the people. He said the fund would be
used for infrastructure development and promotion of health, education
and provision of utility services in every district. It will also be
used for construction of farm-to-market-roads and provision of clean
drinking water. Under the program, three hundred thousand people would
be trained in different skills to sustain our growth.
The Advisor said the donors have expressed their
complete support for the fund. He said World Bank would also increase
its assistance for Pakistan and would be providing 4.5 billion dollars
during the next three years. He said as against nine hundred million
dollars presently, it would provide 1.5 billion dollars annually and
details of the projects and programs to be funded by the Bank would be
finalized during the next few days. Similarly, he said Asian
Development Bank has also agreed to increase its assistance from the
existing eight hundred million dollars to 1.2 billion dollars per
year. The Advisor on Finance said the government would double its
social sector spending and it would be in addition to Khushal Pakistan