ADB's poverty reduction programme

ADB's support for Pakistan itself become a stakeholder in the reform programme

From Shamim Ahmed Rizvi,
Islamabad
 Apr 30 - May 06, 2001

The Asian Development Bank (ADB) will provide 2.5 to 3 billion dollars in the next 5 years to Pakistan to assist it in its poverty reduction efforts. The loans will be a part of poverty reduction strategy being finalised by the Bank and will be disbursed at the rate of 500 to 600 million dollars a year depending on the performance.

This was announced by Yoshihiro Iwasak, Director Programme department ADB at the regional office of the Bank in Islamabad on Monday. Resident Representative of the Bank Marshuk Ali Shah was also present. A poverty reduction forum was also arranged in Islamabad to lay down the future road map for the poverty alleviation.

Appreciating the reforms initiated by the present government in different sectors the Director reiterated ADB's support for Pakistan "as the Bank has itself become a stakeholder in the reform programme of Pakistan". He expressed the hope that with effective implementation of its reform agenda, Pakistan will soon attract foreign investment." Pakistan has great potential for investment but it is a conducive atmosphere that is required, he added.

The ADB director hailed the reforms undertaken by the present government in areas of capital markets, export finance, trade and industry, energy sector and micro finance but said the improvement in health and education sector remain slow. While the economic growth remains the best bet in creating an environment for poverty reduction it is equally important to invest the surpluses created by economic growth in the human development, he remarked.

A team of ADB's currently visiting Pakistan to assess poverty situation and identify areas where lending is required for poverty alleviation. After completing assessment work the team will be signing an agreement with the government by the end of this year, under which the loan will be given to Pakistan.

ADB this year is preparing a new country strategy and programme (CSP) to guide the ADB's development operations in Pakistan. The CSP will reflect government's latest strategies for achieving economic recovery, reduce poverty and improve worsening social indicators. In this regard ADB and government has held consultative workshops in all the four provinces to develop a poverty reduction plan.

The ADB director links the increasing poverty in Pakistan with decline in average GDP growth rate from 6.1 per cent in 1980s to 4.4 per cent in the 1990s and low human resources development. Weak governance he said has also played a significant role in the persistence of poverty in Pakistan, adding the poor fiscal and macro-economic management has constrained the country's overall economic growth.

He continued that sustained and pro-poor economic growth is crucial for poverty reduction and to achieve this the government must deal with major macroeconomic challenges including broadening the narrow bases of production, export, and taxation and bringing down the high debt. Similarly, he said rebuilding of business confidence, refocusing on restructuring and privatizing states-owned public enterprises and improving governance is also important. Yoshihiro assured full support to government in its efforts to achieve these objectives.

The ADB is identifying a number of areas in which it would arrest Pakistan in reducing poverty which, at 30 to 35 per cent compares poorly with other developing countries. The CSP would reflect the strategy for achieving economic recovery and addressing the incidence of poverty and worsening social indicators. The CSP will incorporate ADB's own poverty reduction strategy for Pakistan which is being developed with extensive consultation with stakeholders. The five pillars of the government strategy are economic reforms, to promote growth, physical and social assets creation for the poor, provision of social safety nets to protect the most vulnerable groups and governance.

Elaborating the fields in which ADB could render useful assistance, Isawaki said they held discussions for enhancing growth in agriculture, small and medium industries as a source of income generation and employment of the rural poor, helping SMEs and increasing their export potential.

Earlier addressing the high level forum on "poverty reduction" jointly organised by the Planning Commission of Pakistan and the Asian Development Bank, Finance Minister Shaukat Aziz said that reviving growth, restoring macroeconomic stability, reducing poverty and improving governance would be central pillars of the government's economic strategy.

Shaukat Aziz said poverty alleviation would continue to be corner stone of government's economic approach adding, this issue was on high priority. To handle this problem, the Minister maintained, government was pursuing two pronged strategy with major thrust on pro-poor growth and series of directed measures to address this menace including Khushal Pakistan, Kushali Bank, small and medium enterprises programme, revamping of Zakat regime etc.

Finance Minister said that while Pakistan needed financial resources to support poverty alleviation programmes, it also needed to adopt stabilization measures to reduce vital two gaps—the one between revenue and expenditure and the current account gap.