ISLAMABAD, 26 July — Pakistan’s military regime has a daunting task to rebuild its economy but should qualify for crucial assistance from international donors, a World Bank official said yesterday.
Country Director John Wall said the bank would recommend or disburse interest-free credit of around $850 million to Pakistan in the next year amid signs the government’s economic reforms are working.
“It’s a very difficult path and Pakistan does not have much room to maneuver... but it’s a reasonable expectation that the financial institutions will continue to support it,” Wall said.
“The government is in a debt crisis and faces a very daunting path.” He was speaking at the release of a World Bank progress report which said the regime of President Pervez Musharraf, who seized power in a coup almost two years ago, had made a “clear break from the past” in its efforts to bring the economy back from the brink of bankruptcy.
For the first time in two years, Pakistan was “getting back on track”, providing a basis for a “stronger operational engagement by the bank”, the report said. The bank approved credit of $350 million through the International Development Association last month, and another $500 million in new projects were in the pipeline over the next 12 months, Wall said.
“The government’s reform program is comprehensive, and progress in implementation has established its credibility,” the report said of the regime’s strategy to stimulate growth, pare down debt and reduce poverty.
“The pattern of growing corruption and deterioration of key public institutions has been arrested, and rapid progress is being made. This a clear break from the past.”
Military chief Musharraf toppled Prime Minister Nawaz Sharif in October 1999, a month after the International Monetary Fund (IMF) suspended its lending to the country because of its failure to honor economic commitments. Net public debt was more than 90 percent of gross domestic product, a third of the country’s 140 million people lived in poverty and US-led economic sanctions, a response to 1998 nuclear weapons tests, had created a balance of payments crisis.
But the bank said Musharraf’s efforts to revamp the economy, restore the government’s credibility and root out corruption were finally beginning to pay dividends.
The IMF agreed to lend $596 million under a 10-month standby arrangement inked in November last year, marking Islamabad’s return to international financial circles.
The government is now targeting “exceptional financing” of six billion dollars over four years from the IMF, the World Bank, the Asian Development Bank (ADB) and other bilateral donors.
