Islamabad witnessed a flurry of policy discussions over the last week with foreign partners, the underlying message being the need to launch a second generation of economic reforms to build on the nascent stabilisation.

The dialogue was made possible by 160 plus delegates to the ministerial meeting of the Central Asia Regional Economic Cooperation (CAREC), and the visit of the President of the Asian Development Bank, Takehiko Nakao, and the Managing Director of the International Monetary Fund (IMF), Christine Lagarde, who also called on the prime minister and finance minister.

The visit of the IMF chief to Pakistan was the first one in 10 years. In fact, it was after quite some time that so many foreign dignitaries had arrived within a week’s time and talked about development, investment and growth in the entire region.

While both the heads of the ADB and the IMF were unanimous on the need for deepening structural reforms to get rid of chronic public sector losses and energy shortages, and for wisely managing the China-Pakistan Economic Corridor opportunity, the latter was more candid in her views on the need to fight corruption perception with honesty, transparency and accountability because the menace hampered both investment and growth.

The IMF called on the CAREC nations to adopt multi-faceted policies in order to repair the financial sector, consolidate public finances, strengthen policy frameworks and implement structural reforms to stimulate growth and ensure its sustainability

The ADB chief also echoed similar views in more diplomatic terms. According to him, Pakistan still faced the challenge of maintaining its hard earned initial gains of consolidation and stabilisation and advocated the continuation of deeper structural reforms in the energy sector, use of smart metering and improvement in the public sector enterprises.

An IMF presentation at the CAREC meeting put the cumulative CAREC region economic growth rate as slowing down to around 7pc during 2016, including Pakistan’s growth at 4.7pc. With global baseline average oil prices projected to grow this year to $51 per barrel, the IMF called on the CAREC nations to adopt multi-faced policies in order to repair the financial sector, consolidate public finances, strengthen policy frameworks and implement structural reforms to stimulate growth and ensure its sustainability.

Among the CAREC members, Pakistan and Kazakhstan were the only countries where banking sector vulnerabilities declined over the last three years, although Pakistan stood at the second highest position in terms of public debt, after the Kyrgyz republic — at 65pc of GDP and 70pc of GDP respectively.

On the positive side, the IMF noted that the CAREC countries had now left behind the worst impact sustained from external shocks and were now well positioned to initiate and support region wide reform efforts; otherwise they could face historically low growth prospects.

The CAREC region (excluding China) required investment needs of about $118bn in the energy sector, of which at least $38bn should come from private sector investment between 2017-23.

The CAREC Programme is a partnership of 11 countries — Afghanistan, Azerbaijan, China, Kazakhstan, Kyrgyz Republic, Mongolia, Pakistan, Tajikistan, Turkmenistan, Uzbekistan and Georgia — supported by six multilateral institutions, working together to promote development through cooperation.

In transport, the forum reported that the total length of roads built, upgraded or improved was more than 7,200 kilometres or 93pc of the target for 2020. Newly constructed or improved railways in the six designated rail corridors surpassed the 2020 targets. Based on this, the parties agreed to finalise, by next year, the CAREC Road Safety Strategy and Railway Strategy (Both from 2017-30) to ensure all these corridors safe, efficient and attractive for all users.

The highlight of the CAREC deliberations was the recent launch of the 500kV transmission line between Pule Khumri and Kabul, and the associated substations for completion in December 2018, as part of the Turkmenistan-Uzbekistan-Tajikistan-Afghanistan-Pakistan Interconnection Project (TU-TAP) — with a transmission capacity of 1000MW — enabling year round energy export.

Under the Turkmenistan-Afghanistan-Pakistan (TAP) power interconnection, Turkmenistan will be able to export electricity to Afghanistan and Pakistan. Because of procurement challenges, barriers to regional connectivity and the new initiatives on power import options, the completion deadline for Central Asia-South Asia (CASA-1000) was moved up to 2020 from its previous target of 2018.

Some fresh options also came to light for further strengthening the regional power market: bulk power transfers from Turkmenistan into Afghanistan and Pakistan by building interconnections along the TAPI natural gas pipeline corridor route, and new off-shoot lines from the TUTAP transmission backbone into northern and western Pakistan. In addition, a 500kV TAP power transmission using southern Afghan Corridor (Mary-Heart-Hemand-Kandahar-Chaman-Quetta) is in the preliminary phase.

Also welcomed were the funding arrangements for the next phase of the Turkmenistan-Afghanistan-Pakistan-India natural gas pipeline in April 2016 and shareholders’ investment agreement. The members noted that although expected to exceed $10bn, the total project cost would be determined once the detailed design and the arrangement for the procurement of long-lead items, construction and other services, were decided.

TAPI will help bring in 13.8bn cubic metres of gas from Turkmenistan to meet Pakistan’s growing energy demand and boost its energy security, besides creating economic opportunities and jobs. The TAPI Pipeline Company Limited (TPCL) will build, own, and operate the pipeline for 30 years.

All these wide ranging structural reforms are needed in the energy sector to get ready for power and gas imports and to avoid multiplication system losses that currently plague power and gas companies. With 19 and 13pc loss respectively, Pakistan may not have the capacity to absorb such high inefficiencies.

Published in Dawn, Business & Finance weekly, October 31st, 2016