I am delighted to be back once again in your midst this year
and wish to
thank you for inviting me this evening to share my views
about Pakistan’s
economic prospects with this distinguished gathering.
I would like to address the following three questions that
are of great
interest to every Pakistani, whether living in Pakistan or
abroad. (a) What has
been accomplished so far? How sustainable these reforms and
policies are? (b)
What is the future outlook and prospects for Pakistani
economy? and (c) What
are the challenges and risks facing the economy?
Accomplishments Made So Far:
There is a general agreement both within and outside
Pakistan that there
has been a remarkable turnaround in the economy during the
last five years.
What are the main accomplishments that have laid the
foundations for
sustainable growth and poverty reduction in the future? I
would list at least eight
such factors that have made a significant positive
difference in the economic
landscape of our country.
1.
2.
3.
4.
5.
6.
7.
8. |
Fiscal Discipline: The major cause of Pakistan’s economic
ills lay in
the imprudence of fiscal policy where the governments
indulged in
excessive spending in relation to their revenues and
incurred deficits in
the range of 6 to 7 percent of GDP. These persistent
imbalances led
to accumulation of public debt that reached unsustainable
level of 100
percent of GDP by 1999-2000. The Musharraf Government has
taken
tough measures to introduce fiscal discipline in the country
and has
been successful in bringing fiscal deficit down to 2.4
percent last year.
How has this been achieved? There are three ingredients
responsible
for this outcome. First, revenue mobilization has doubled
from almost
$300 billion to $600 billion in this period through a
combination of
improved tax administration, reducing the discretion of tax
collector
and minimizing interaction between tax payer and tax
collector,
rationalizing the tax rates and structure and widening the
tax base to
some extent. Universal self assessment system for income tax
has
increased both the number of voluntary filers as well as tax
collection.
Second, the burden of debt servicing has been radically
lowered. Five
years ago, more than 50 percent of government revenues were
preempted
by interest rates. But, the carefully designed strategy of
debt
management implemented during this period has led to decline
in this
ratio to almost 25 percent with a downward moving trend.
This has not
only allowed lowering of fiscal deficit but provided fiscal
space for
doubling development expenditure. Third, the hemorrhage
caused by
the losses incurred by the public sector enterprises has
been stopped
and either these enterprises are being privatized or their
performance
has improved as a result of good governance and tighter
management.
Financial Sector Reform and Restructuring: The financial
sector
has become the lynchpin of the revival of economic growth in
Pakistan.
Not only that the sector has become sound and healthy and
strong
enough to withstand exogenous shocks but has played a major
role in
broadening access to the middle class and lower income
groups.
Average bank lending rates have come down to 6 percent from
15-16
percent five years ago and 21-22 percent in the 1990s. This
decline is
a result of lower demand for credit by the public sector as
it reduced
fiscal deficit and plugged in losses; the competition
between the private
sector owned and managed banks who now hold 80 percent of
the
banking assets; the removal of drag of non-performing loans
by
tackling them in a decisive way; the lowering of corporate
tax rate on
the banks; the assumption of affairs of banks by
professional
management and a vigilant role played by the Central Bank in
supervision and regulation of the system. Lowering of
interest rates
gave a kick start to the private sector credit that, in
turn, led to better
capacity utilization and higher output in manufacturing
sector recording
growth rate of 17 percent last year. Higher manufacturing
growth
contributed towards the achievement of 6.4 percent GDP
growth last
year and is making similar contribution this year.
Pakistan’s banking
system by opening its doors for mortgage, automobile,
consumer,
credit cards, SMEs, agriculture and microfinance has
broadened the
borrower base and brought in its fold firms, farmers and
individuals
who had never used bank credit for their productive
activities or
financing needs. This movement is still in its infancy and a
lot of efforts
have to be made in order to maintain this momentum.
Macroeconomic Stability: Even the worst critics of the
present
government do admit that Pakistan has been able to achieve
macroeconomic stability although according to them the
benefits have
not trickled down to the common man. Macroeconomic stability
that
had eluded us for a long period of ten years in the 1990s is
the
foundation for sustainable economic growth. All indicators,
whether
current account balance, inflation, fiscal balance, exchange
rate,
interest rates, foreign exchange reserves, point clearly to
a positive
direction. The challenge for the economic managers is to
maintain this
stability so that private investors can make investment
decisions with
full knowledge of the expected profitability in an
environment where
there is little turbulence or swings in the key prices. The
continuity,
consistency, predictability and transparency of economic
policies are
essential to foster this environment. In this complex world
of
interdependence and interconnections there would be moments
of
tension and uncertainty but better communication, fuller
disclosure of
facts and information to the markets and regular interaction
with the
economic players will keep things under control.
External Debt Vulnerability: Along with high fiscal
deficits, Pakistan
was faced with rising and unmanageable external debt burden.
By
1999/00 the external debt as a ratio of GDP had reached
almost 52
percent. The new Government that assumed power took upon
itself
the task to bring down this burden to an acceptable level.
It designed
a strategy of debt management that consisted of a long term reprofiling
of Paris Club bilateral debt, substitution of non-concessional
loans from
IFIs by concessional loans, early repayment of expensive commercial
and short-term debt and fiscal consolidation. This strategy
has been
successfully implemented and the absolute stock of external
debt and
liabilities has, in fact, gone down from $38 billion to $35
billion. The
ratio of external debt to GDP in 2004-05 is likely to be
around
33-34
percent and is on a downward trajectory. Average interest
rate on the
stock of debt has more than halved and external interest
payments as
a proportion of foreign exchange receipts have gradually
dwindled to
less than 25 percent providing a breathing space and freeing
the
country from the undue pressures of crisis management.
Deregulation: in a number of areas such as petroleum,
natural gas
and agriculture inputs and outputs the prices and trade have
been
completely deregulated. Market forces determine the prices
that are
no longer controlled or administered by government decrees
or
regulations. Although the mindset of the administrators has
not
changed and instances of petty harassment and extortions by
these
officials are rampant, the government policy has been quite
clearly
articulated. For example, the cotton farmers are free to
export their
produce without any taxes or duties if there is excess
supply
domestically and no permits or licences are required.
Similarly, the
spinners are at liberty to import cotton at the prevailing
international
prices without any duties or barriers if they believe that
the domestic
crop is short. Government no longer imports petroleum and
petroleum
products but the task has been assigned to the private
sector. Nor are
the fortnightly prices of local POL products determined by
the Ministry
of Petroleum but by the distributors themselves. Subsidies
on
fertilizers have been removed and most of the roduction,
marketing
and imports or exports are carried out by the private
sector. The prices
of end products rise and fall according to the dynamics of
supply and
demand. Trading Corporation of Pakistan does step in on
occasions
but its main task is to intervene in the market where
shortages or
excesses threaten orderly market conditions in essential
commodities.
The most successful experience of deregulation has taken
place in the
telecom sector. The monopoly of the state owned PTCL has
been
broken and new licences have been issued for Local Loops,
Long
Distance and International Lines. Cellular telephone segment
has
shown highly impressive growth during the last few years and
two new
international investors have purchased licences through open
auction.
The subscriber base in cellular phone has jumped from 3
million to 7
million in the last one year and it is expected by 2005 the
number will
cross 15 million – an unprecedented feat.
Privatization: The Government has made it clear that it
is not in the
business of running enterprises and it is, therefore,
divesting its
interests in state owned enterprises by selling them to
strategic
investors in the private sector. Most of the banks,
industrial
companies, etc. have already been transferred to the private
sector.
The shares of some utilities and infrastructure companies
have been
floated through stock exchanges. But now is the turn to sell
large
ticket items such as PTCL, PSO, Power distribution and
generation
companies, integrated power utility such as KESC. The
calendar for
future privatization is quite crowded and it is expected
that most of
these companies will be off the books of the government by
the end of
year 2005. The efficiency gains, tax revenues accruing to
the
government instead of subsidizing their losses, improved
customer
service and expansion through new investment are some of the
direct
and indirect benefits to the economy from privatization.
Trade Liberalization: Pakistan was known for its
extremely high tariff rates that were used to raise government revenues and also
to protect
domestic industries. In the early 1990s the maximum tariff
rate was
more than 100 percent. These higher tariff walls, in fact,
had highly
pernicious effect as wide spread smuggling discouraged
domestic
production and promoted imported goods. Pakistan’s tariff
rates have
been gradually brought down to the current maximum rate of
25 percent.
The average tariff rate is as low as 13-14 percent and
should be further
lowered. Contrary to conventional wisdom the reduction in
tax rates has
not only ended smuggling of a large number of imported goods
and
stimulated domestic production, but has also raised custom
duty
collection. Lower tax rates and absence of discretionary
measures by
the customs officials have, in fact, created disincentives
for tax evasion
and helped accurate declaration and classification of
imported goods. It
is seldom realized that high tariffs act as a tax on exports
that are not
able to obtain the required imports and raw materials for
meeting their
production in a cost effective manner.
Financial Sovereignty: Pakistan had lost control on its
economic
management and thus virtually conceded the right to design
policies to
international financial institutions particularly the IMF.
We had lost our
credibility as a serious development partner because we
entered into
successive agreements and made commitments on policy reforms
and
institutional changes. But, we were good at drawing down the
first
tranche of the loan and then abandoning the programme. It is
only
since the year 2000 when Pakistan entered into a stand-by
arrangement with the IMF (successfully completed in 2001)
followed by
a three-year PRGF programme that the country has shown
serious
mindedness and a commitment to fulfill its obligations. By
the end of
2004 Pakistan had drawn down 12 tranches in succession on
time
without any hiatus and decided to forego the remaining two
tranches
voluntarily after the review was completed by the IMF Board.
Pakistan
has thus been able to regain its financial sovereignty and
is no longer
dependent on the whims and caprices of the international
financial
institutions or large bilateral creditor countries who
control these
institutions. |
Sustainability of Reforms and Policies:
How can one be sure that these reforms and policies will be
sustained in
the coming years? To address this question, let us first
look at the history of
economic policies and reforms pursued by different political
parties who come to
power in the 1990s and at their party manifestos to gain
some insight into the
future direction of policies. The most comprehensive reforms
aimed at
liberalization, deregulation and privatization of the
economy were initiated by the
Nawaz Sharif Government in 1991 and institutionalized under
the Protection of
Economic Reforms Act 1992. These same policies were followed
subsequently
by Benazir Government, the second Nawaz Sharif Government,
the Interim
Governments, the Military Government of 1999-2002 and the
Elected
Governments since 2002. There has been uneven or slow
implementation of
these reforms , there has been economic mismanagement but,
at no stage,
these policies were rejected, derailed or abandoned. The
Economic Reforms Act
of 1992 is still in force after 12 years of its inception.
The manifestos of all
political parties subscribe to the same set of policies
although their priorities,
sequencing, phasing, points of emphasis are different and
more nuanced. Thus,
there should be little fear in the minds of anyone about the
reversal of these
reforms and policies by any future government in Pakistan.
There have been some irreversible changes that have set in
the country’s
economic landscape that augur well from sustainability and
continuity
perspective. The Parliament is expected to pass a
legislation called Fiscal
Responsibility and Debt Limitation law which will limit
fiscal deficit and target
reduction in debt-ratios every year. As fiscal indiscipline
has been the bane of
Pakistan’s economic problems in the past, this particular
initiative will restrain the
successive governments from indulging in reckless spending
and excessive
borrowing. The Country’s Parliament rather than the IMF will
act as the
watchdog on the Government’s finances and it will be
difficult for any
Government to deviate from this path unless there are cogent
reasons to do so.
Fiscal transparency has also been entrenched as the Federal
and
Provincial Governments are obligated to publish audited
quarterly statements of
accounts. These statements are available to the public at
large and can trigger
questioning of fiscal policy decisions taken by the
Government. The Auditor
General is an independent and constitutional position who
submits an annual
report to the Public Accounts Committee (PAC) of the
National Assembly on
financial irregularities and the officials concerned are
answerable to the PAC for
their actions and decisions.
The Central Bank has been made autonomous and given
constitutional
protection. Its affairs are supervised and controlled by an
independent Board of
Directors consisting of nine eminent members of stature
drawn mainly from the
private sector and having only one representative from the
Ministry of Finance.
The Ministry’s Representative does not enjoy any veto power
and all decisions
are taken by a majority vote. Neither the Governor nor the
Board Members can
be removed arbitrarily by the Federal Government. The State
Bank of Pakistan
(SBP) has acquired core competencies and technology to
perform its functions
and submits Quarterly and Annual Reports to the Parliament
on the State of
Economy regularly.
Similarly, the Securities and Exchange Commission of
Pakistan (SECP)
and the Central Board of Revenue (CBR) have been reformed,
strengthened and
made autonomous to promote corporate governance and tax
mobilization
respectively. These key economic institutions will thus
carry out their obligatory
functions in a professional manner insulated from the
interference of the
government.
The Nationalized Commercial Banks (NCBs) had acted as the
main
conduit for political favors in the financial sector. Most
of the appointments of
Chief Executives and the Boards of Directors were not made
on considerations
of merit and competence, but for their loyalty to the Prime
Minister of the day.
Consequently, most of the loans were approved to favour
individuals and firms
connected with the ruling party. This state of affairs had
led to large accumulated
losses, huge non performing loans and weak governance. As
almost all the
NCBs except one have been privatized, this linkage between
the Government
and the financial sector has been severed. Healthy
competition among the
banks has infused high standards of professionalism in the
banks and the
financial sector has become strong and efficient. It is
unlikely that any future
government will ever attempt to bring about status-quo ante
and nationalize the
banks.
Pakistan has entered international capital markets which
will also be
watching and monitoring the economy as the investors in
Pakistani Bonds have
developed stakes in economic well being of the country. Any
wrong policy
actions or poor governance will be severely and
instantaneously penalized by the
markets and Pakistan will have to bear the adverse
consequences of this fall out.
Governments will therefore have to be extremely careful and
responsible in their
management of the economy.
Pakistan has also entered into a multilateral trade
agreement with the
WTO and committed that it will keep its markets open to
goods and services,
liberalize trade regime, remove non tariff barriers and
provide equal and nondiscriminatory
treatment to all countries. These commitments provide a
solid
assurance about the stability and transparency of trading
regime in Pakistan in
future.
Finally, the media – print, as well as, electronic – in
Pakistan has emerged
as a fierce and independent watchdog on the activities of
the government. Poor
economic governance was the other key factor responsible for
Pakistan’s weak
economic and social outcomes in the 1990s but there is
greater awareness today
that we cannot afford to slip into the past mode. Any
wrongdoing or malpractice
is exposed by the media and thus helping spread of good
governance in the
country.
Outlook for the Future:
Pakistan’s past economic history suggests that rapid
economic growth has
been associated with poverty reduction. Once GDP growth rate
persists over 6
percent per annum over a long period of time the incidence
of poverty begins to
decline.
GDP growth rate is projected to rise to 7 percent in the
current fiscal year
with inflation rate hovering around 7 percent. The next five
years plan envisages
an average GDP growth of 7 percent reaching a level of 8
percent in 2010 and
inflation contained to average 5 percent. With the
population growth rate
declining to 1.5 percent, this growth rate will translate
into 6.5 percent rise in per
capita incomes which should double at this rate in the next
10 to 11 years.
Empirical studies indicate that the best way to achieve
higher rates of
economic growth is to raise investment and to improve the
quality of institutions.
An increase in investment ratio by 5-6 percentage points
over the next 5 years
and improving the quality of institutions could result in
the postulated increase in
the per capita growth. What are the prospects for raising
investment?
The successful implementation of Debt Management Strategy in
the last
five years has not only brought the debt burden down to
sustainable levels in the
future, but also reduced interest payment out of the budget
significantly. The
public sector investment programme that was constrained due
to these high
interest payments is now expanding. As a result, development
expenditure will
continue to rise – both in absolute terms and as a ratio of
GDP – pushing up the
overall investment rate for Pakistan. As the private sector
is able to obtain the
infrastructure services and the social services it needs,
the cost of production will
become lower for capacity expansion or investment in new
areas of business.
The recent experience suggests that investment rate will
rise and productivity of
investment will improve, making it possible to attain 6 to 7
percent GDP growth
rates.
Pakistan has committed itself to bringing the incidence of
poverty down to
16 percent by 2015 under the Millennium Development Goals (MDGs).
Other
MDGs for Pakistan are: (i) Literacy rate of 86 percent and
Gross enrolment ratio
of 100 percent; (ii) Ratio of literate females to males
reaching 0.93; (iii) Infant
mortality rate down to 40 with under five mentality to 52
and more than 90
percent of children fully immunized (iv) 100 percent
coverage by lady health
workers of target population (v) Sustainable access to safe
water available to 93
percent of population with 55 percent having access to
sanitation.
These goals have been incorporated in the Poverty Reduction
Strategy
Paper (PRSP) as well form part of the next five year plan.
The achievement of
per capita growth targets and Millennium development goals
will very much
depend upon political stability, sound leadership committed
to growth and
poverty reduction and to the extent the challenges facing us
are tackled
successfully by the government, private sector and the civil
society together.
These challenges though formidable are by no means
insurmountable.
Challenges for the Future:
Despite the impressive studies made on several fronts in the
recent past
Pakistan has a number of challenges to reduce incidence of
poverty to half its
current level by 2015. This will require sustained GDP
growth rates of 7 to 8
percent per annum, targeted poverty interventions and
accelerated investment in
human development. Some of these challenges are listed
below:
1.
2.
3.
4.
5.
6.
7. |
Diversification of
Export Base: Two thirds of Pakistani
exports are
based on Cotton textiles while in the world market textiles
are not a
dynamic commodity. Technological base of Pakistani exports
is low and
the share of engineering goods is almost negligible. Not
only the share of
engineering goods in the world market is almost 50 percent
but is rate of
growth is above average. Thus the need for diversifying away
from
textiles to medium technology exports is quite obvious.
Greater
emphases on technical and vocational education as well as
integration
into world supply chains are critical for this
diversification. Reliance on a
single commodity based exports is neither desirable nor
beneficial in the
long run and is prone to serious risks.
Development of Human Resources: It has been well
established and
there is a broad consensus that among all the factors that
will make a
difference to Pakistan’s economic and social goals is the
extent to which
we are able to step up investment in human development.
Indeed this is
the single most dominating factor that has kept the country
below its
potential. High population growth has given rise to a young
dependent
population and increased unemployment among the youth. The
average
years of schooling of labor force (3Ľ years) remains quite
low making it
difficult to impart new skills to the burgeoning labour
force. Raising this by
1˝ - 2 years could have raised real per capita economic
growth rate by
about ˝ percentage points per year. Investment in higher
education,
science and research, vocational and technical education,
female
education thus should be the highest priority for the next
ten years. This
can only be achieved if there is a strong public – private –
community
partnership in the governance and provisioning of education
and health.
Investing in human development through better education and
health care
benefits the poor directly but these should be well
targeted.
Investment in infrastructure: Higher economic growth
rates can be
sustained on a long term time horizon only if the
bottlenecks, shortages,
disruptions and breakdown in supplies, in power, gas, oil
pipelines, ports,
railways, and congestion in roads and highways are removed.
This
requires huge investment in each of these areas. Public
Sector
development program can finance only one half of the annual
requirements of US $ 3 billion. The remaining requirements
will have to
be filled in by the private sector.
Regional Hub: Another reason for large investment in
physical
infrastructure is to exploit the potential of Pakistan’s
strategic location as a
regional hub for the Middle East, Central Asia and Western
China and
South Asia. Gwadar port is being developed to take advantage
of this
potential but developing a network of highways, warehouses
and
terminals, oil and gas pipelines, power generation plants,
facilitation of
cross – border trade, harmonization of tariffs and duties
are some of the
ingredients that will pave the way for meeting this
objective. Peaceful
relations with the neighboring countries and greater
cooperation in areas
of trade and transit will lay the solid foundations.
Productivity Increase in Agriculture and
Industry: Compared to the
countries in East Asia and China that should serve as the
benchmark for
Pakistan’s competitiveness we lag behind in total factor
productivity as
well as productivity gains in commodity producing sectors.
Although the
yields per hectare of major crops have risen over time these
are still lower
than those in Indian Punjab and Haryana. Except for export
industries the
productivity levels in manufacturing are sub optimal.
On-the-job training
and injection of new skilled workers are some of the short
term measures
that can help but in the long term, emphasis on technical
and vocational
education rather then producing graduates with generalized
education will
yield the desired results.
Judicial and Legal Reforms: It is believed that the
financial sector and
real sector of the economy will benefit immensely if land
titles were clear,
coded, actively traded, mortgaged and exchanged without much
hassle; if
the court system is unclogged and the enforcement of
contracts is much
quicker with low transaction costs and if the poor have
equal access to the
Police and the judiciary for redressing wrongs done to them.
In Pakistan,
the slow and cumbersome legal system combined with unequal
access to
the poor to the system have to be put right both for
efficiency gains as well
as for attaining a just and equitable distribution.
Widening the Tax Base: The tax administration that has
been practised
in Pakistan has deployed indirect means, presumptive
assessment and
compulsory withholding taxes to collect most of the taxes.
This system
has not only kept the tax – GDP ratio stagnant but also restricted the
growth of tax base and tax payers. The recent reforms of the
Central
Board of Revenue give some hope that tax base will be
widened so that
tax – GDP ratio can rise and a more equitable incidence of
burden takes
place. A natural corollary of this widening of tax base is
that the tax rates
particularly for individual income tax and corporate tax can
be reduced
gradually and thus discourage the incentives to evade taxes.
Tax
collection in Pakistan has been much higher when the rates
are low
supporting the supply side hypothesis. |
Risks to the Future Outlook
Several observers of Pakistan economy appear to be overly
obsessed
with the political risk arguing that the country may end up
with a situation in which
the Islamic extremist parties or their sympathizers in the
Army wrest control over
the country’s nuclear arms. The victory of the MMA in the
NWFP and
Balochistan and their apparent anti-American stance have
fortified the beliefs of
these observers mostly in the western think tanks and the
media. Both the main
components of the Alliance – Jamaat-e-Islami and Jamiat
Ulema Islam – have no
history or links with religious extremist groups who have
created violence in the
country. This risk is also highly exaggerated as more than
88 percent of Pakistani
population voted for the mainstream moderate political
parties at the most recent
elections. Pakistan Army is a highly disciplined, organized
and modern force and
the support for the extremist parties in the ranks of Army
is almost non-existent.
These western observers have very little familiarity with
the strength and
resilience of Pakistan’s polity. Pakistan’s nuclear assets
will remain safe as
country has developed an effective command and control
system.
The geopolitical risks facing Pakistan have also been
mitigated as a
composite dialogue has been opened with India and the
relations with the Karzai
government in Afghanistan have been normalized and
strengthened. The first
democratic elections in Afghanistan took place peacefully
reflecting the
cooperation and support of Pakistan government. The
intensity in exchange of
people, cultural troupes, sporting teams, media
representatives between India
and Pakistan has brought about a new atmosphere of harmony
and goodwill in
the two countries.
Although the political and geopolitical risks remain
paramount in the minds
of the western observes there are residual risks that can
possibly slow down the
trajectory of high economic growth and poverty reduction.
First, it is assumed above that the country will continue to
face a benign
external environment and will remain free from major
upheavals and
unanticipated exogenous shocks. In case the external
environment becomes
hostile or some other major internal disturbance takes
place, it is unlikely that the
high growth momentum can be maintained.
Second, the implementation capacity and weakness of
institutions are still
major obstacles. The need to inculcate professionalism,
expertise, competence
and systems to make the civil services meet the realities of
the 21st century is
being met through reforms but will take some time. In the
meanwhile, the nature
of the government has dramatically changed; public
expectations have
heightened while implementation capacity of government
policies, programs and
projects as well as the delivery of public services has been
seriously impaired.
Sound policies can see the light of day only if the
institutional capacity is
strengthened and reoriented. Public-private-community
partnership provides a
way forward to mitigate this risk. The reform of civil
service is on the agenda but
needs to be expedited.
Third, the legal and judicial system is out-of-sync with the
requirements of
modern business practices. Contract enforcement, sanctity of
property rights
and dispute resolution mechanisms leave much to be desired.
Congestion of
courts, cumbersome and time-consuming procedures, inadequate
training of
judges in commercial and banking laws and physical
infrastructure facilities are some of the constraints for
the present state of affairs. Reforms of laws and
judiciary have to be given priority attention by political
leaders. The Asian
Development Bank (ADB) is assisting the government through
its Access to
Justice programme.
Fourth, the most important missing link in Pakistan’s
competitive edge and
what is posing as a serious threat to its economic progress
are the poor
indicators of human development. Adult literacy and the
skill level of the labour
force are low, health status is precarious with low
productivity, high absenteeism
and gender disparities are large. The country has to devote
more attention and
resources to invest in education, health, nutrition and
gender programmes to equip the labour force to excel in its area of
specialization.
Finally, Pakistan has embarked on a program to devolve
administrative
functional and financial powers to local tiers of
government. This experiment is
extremely critical for providing essential public services
at the doorsteps of the
poor people. The teething problems and legal snags
confronting the local
governments if unresolved, could create a potential
difficulty in reaching out to
the poor.
These risks, except those arising out of adverse or
unanticipated
exogenous shocks, can be mitigated through a series of
reforms. Institutional
capacity can be strengthened, judicial and legal processes
can be revamped,
human development can be accelerated and devolution of
powers can be
expedited. The balance of risks therefore suggests that
given a benign global
economy and domestic political stability, Pakistan can move
forward in its march
towards meeting its economic and social goals. |
