Pakistan needs $20 billion investment in water and power

Feb 21 - 27, 2005

The World Bank would provide $1 billion assistance (soft loans) annually for next three years to help fight poverty and achieve economic and social goals in Pakistan. The Asian Development Bank (ADB) has already pledged almost the same amount for the same period.

The loans will be made available from International Development Association (IDA) the concessional lending arm of the World Bank under IDA-14. The IDA-14 will begin from July 1, 2005 for a three-year period at the end of existing IDA-13 in June this year. According to World Bank President, James D. Wolfensohn, Pakistan's economy was set to grow, but it still faces some key challenges, including rebuilding investors' confidence, improving the social indicators and infrastructure development. Wolfensohn was on three-day visit to Pakistan.

"The purpose of a visit was to ensure that the World Bank was in line with the government in terms of a billion dollar per annum programme planned for next three years," said Wolfensohn at the conclusion of visit.

He said fighting poverty remains the core challenge for the country, while rampant corruption was still a problem for Pakistan, like many other countries. He advised Pakistan to improve its performance in the area of poverty reduction, which is 30 percent currently.

A written statement issued at the press conference said that the World Bank President appreciated Pakistan's economic achievements and its bold reform programme. He also urged to avoid the risk of complacency that sets in with success, and emphasized that the challenge now for Pakistan is to sustain reforms in order to accelerate growth and achieve the millennium development goals. He said "Pakistan's must stay on course until the benefits of its achievements reach the vulnerable sections of the society including the very poor, women, children and the disabled. The country however, cannot deal with poverty without rapid deal, without rapid growth, and Pakistan has done very well to accelerate its growth all across the macro economic front. This, he said, would enable it to concentrate on improving social outcomes.

The World Bank President emphasized that Pakistan still has a long way to go in terms of achieving its human development goals, and that a renewed focus on better social service delivery, and empowerment of women will allow Pakistan to contribute to the achievement of the millennium development goals. The World Bank Chief said he was particularly impressed by the performance of the reform process.

During his stay in Islamabad, the World Bank chief met President Pervez Musharraf, Prime Minister Shaukat Aziz, and the PM's advisor on finance, economic team and key members of the cabinet. He also called on Chief Minister Punjab in Lahore besides meeting Governor State Bank and representative of private sector.

Sharing the outcome of his meetings in Islamabad, he said that 7 percent growth by a country, which was around three percent a few years back, was quite an achievement. He added that with continued implementation of the priorities laid down in Pakistan's Poverty Reduction Strategy; Pakistan was now ready to unleash its potential ensuring the benefits reach the most vulnerable, significantly reducing poverty and improving living standards for the population.

During his previous two visits, first during the Nawaz Sharif's government and then in 2002 during President Musharraf's rule he praised Pakistan's policies. The Bank maintains that Pakistan has consolidated "its remarkable economic turn around with growth increasing above 6 percent, the debt burden falling substantially and poverty related spending rising steadily. The education and health spending in Pakistan, both as a ratio to GDP and per capita, is among the lowest levels in the world. Although social and poverty related expenditures have been raised to 4.6 percent of GDP in 2003-04, from 3.8 percent of GDP in 2001-02, they remain short of requirements to dent the poverty levels."

A government sample survey conducted in early 2004 suggests that poverty has fallen over the last three years. The survey showed a decline by 4 percent in the poverty rate, to 23 percent. The last official household survey in 1998-99 showed 32.1 percent poor in the country.

"The results of this survey are not fully comparable with those from earlier household surveys, as its sample size was much smaller and the poverty line may have been underestimated," a report of the International Monetary Fund said. The IMF data provided some sectoral indicators showing no major change so far in the social sectors. Many intermediate outcome indicators for the health and education sectors have yet to show significant improvements. Real wages in the manufacturing sector have declined by 7.5 percent in real terms since 2000-01. Pakistan is still ranked low in the 2004 UNDP human development index, according to IMF's data. "Overall, poverty remains widespread and Pakistan faces a major challenge in trying to meet its Millennium Development Goals (MDGs). The official unemployment rate 7.7 percent has more than doubled over the last 15 years."

"If the country is providing soft loans, through the concessional lending arm of the World Bank (IDA), it could further accelerate the process of economic development in the country," Prime Minister Shaukat Aziz recently told the Executive Directors of the Bank. Pakistan needs enhanced IDA allocations to meet funding requirements for the social sector development, he said. "Pakistan needs at least $20 billion new investments in the water and power sectors to avoid blackouts and food shortages in the near future but such levels of resources are not available so far."