Pakistan deals with oil, quake crises well: IMF/WB
By Our Correspondent
WASHINGTON, April 24: The world economic outlook report for 2006 praised Pakistan as a country which has done well in sustaining major setbacks like an unprecedented hike in oil prices and the October 8 earthquake.
The report, issued after the weekend spring meetings of the World Bank and the International Monetary Fund, noted that in Pakistan “growth has remained robust despite headwinds from higher oil prices, devastating natural disasters, and the elimination of international textile trade quotas.”
But the report warned that during the current fiscal year, inflation has picked up, and urges “a further tightening of monetary conditions, supported by continued prudent fiscal policies” to curb inflation.
The report urges policymakers in Pakistan to include energy sector in their priorities for structural reforms.
Another South Asian country which dealt successfully with rising oil prices is Bangladesh.
The report also included Pakistan and India among the countries where the current account has weakened during 2005, moving into deficit.
“These disparate movements are due to the non-oil balance, which has generally declined in countries where domestic demand growth has accelerated and/or where the real effective exchange rate has appreciated,” the report said.
Pakistan is also placed among countries — such as India, Indonesia and the Philippines —with high public debt where the favourable outlook provides an opportunity to “take steps to put their public finances on a sustainable medium-term footing.”
In a separate assessment of the Indian economy, the World Bank and IMF termed India’s economic growth as “impressive”, but also said the country faces a challenge in the infrastructure sector which it needs to improve upon in order to attract more foreign investment.
“Overall, India is doing impressively well. How a very large country with an extraordinarily diverse population can make real inroads in poverty reduction and in development with a democratic system, I think that’s encouraging,” World Bank President Paul Wolfowitz said.
“I think Indian officials that I spoke to aren’t satisfied with the 7 per cent or so that they’re doing, but I must say that is impressive already, and I think they are making every effort to do more,” Mr Wolfowitz said.
Managing Director of the International Monetary Fund Rodrigo de Rato observed that India was attaining its growth rate with very low inflation andsaid it “shows the Indian economy is becoming much more efficient. We believe that maintaining macroeconomic stability and deepening reforms is the key for the future.”
“We have seen some very encouraging announcements by Prime Minister Manmohan Singh regarding further liberalisation of financial reforms, and certainly, infrastructure is a challenge for India and improving the business climate as to attract more foreign and domestic investment,” he said.
Corruption and good government were the overriding themes of the final session of the World Bank — International Monetary Fund’s meetings in Washington.
In his concluding remarks, the World Bank chief called aid effectiveness and good government “twin issues” in the battle to help the world’s poorest people.
“Efforts to improve aid effectiveness cannot be separated from strengthening governance systems,” he said. “When governance systems fail, service provision weakens, corruption increases and growth is undermined.”
The problem with corruption, he said, was “one that can’t be eliminated overnight, you have to tackle it progressively.”
Colombia’s Finance Ministers Alberto Carrasquilla serves as the chairman of the joint World Bank/IMF Development Committee. He said nations are looking to the international lenders for guidance to governing. “Members called on the bank to lay out a broad strategy for helping member countries strengthen governance and deepen the fight against corruption,” he said.
On the issue of energy, Mr Carrasquilla said there was broad support for the bank proposal to focus on the energy needs of developing countries. World Bank’s Vice President for Infrastructure Katherine Sierra said the bank will increase investments in renewable energy sources such as hydropower and solar power.
