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Annual Report 2002 : South Asia

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Pakistan

Economic performance

Pakistan’s overall economic performance improved in FY2002 (ending 30 June 2002), primarily as a result of higher growth in the agriculture sector. Total consumption expenditure, particularly expenditure on defense and public administration, rose by 5.0% in FY2002, compared with 1.2% in FY2001, and the net contribution of the external sector also increased by over 30%. The real GDP growth rate was higher at 3.6%, compared with 2.5% in FY2001. Inflation fell further from 4.4% in FY2001 to 3.5% in FY2002. The overall fiscal deficit declined to 5.1% of GDP in FY2002, excluding one-off expenditures. Budgetary poverty-related expenditure closed at rupees (Rs)133.5 billion in FY2002, or 3.6% of GDP. A surplus of $2.7 billion was achieved in the current account, resulting from positive developments in almost all subcategories. Foreign exchange reserves held with the State Bank of Pakistan increased to $7.6 billion by the end of 2002. However, the investment climate remained unfavorable and total investment declined from 15.9% in FY2001 to 13.9% of GDP in FY2002.

ADB operations

Operational strategy: ADB’s strategy for Pakistan, approved in May 2002, supports the Government’s thrust in reducing poverty through assistance in areas of shared strategic importance. Under the strategy, ADB will support ways to promote governance by improving access to justice, and services delivery for the poor through decentralization. The emphasis has shifted from supporting economic growth to maximizing its impact on poverty reduction through rural development and employment generation through small- and medium-sized enterprises. The strategy also emphasizes the need to reduce gender disparity. ADB assistance in Pakistan has become more decentralized, with more projects being implemented with the provincial governments. The operational program has also become more focused on the Government’s development priorities.

Policy dialogue: In 2002, dialogue with the Government centered mainly on governance-related reforms, including legal and judicial reform, decentralization, corporate governance, and public resource management. This was supported by programs such as the Decentralization Support Program, approved in November 2002, which aims to promote effective and efficient local government structures and continuing reforms under the Access to Justice Program. In the financial sector, the Financial (Nonbank) Markets and Governance Program, approved in December 2002, will support governance reform; and the Rural Finance Sector Development Program will develop rural finance institutions. The proposed Punjab Resource Management Program, which was initiated by the provincial Government in 2002, will support public sector reform in Punjab.

Loans and technical assistance: Thirteen loans totaling $1,141 million for seven projects were approved in 2002. The projects are intended to decentralize elementary education; develop the Punjab road sector; promote rural development in Sindh Province; promote the governance and decentralization program; enhance local government performance; mainstream gender and governance; improve community water supply and sanitation in Punjab Province; promote financial (nonbank) markets; strengthen pension insurance and savings systems and the regulation, enforcement, and governance of nonbank financial markets; and develop the rural financial sector. Seventeen technical assistance totaling $7.7 million were approved (see tables 1, 6, 24, and 25 in the Statistical Annex).

Project implementation: Since joining ADB in 1966, Pakistan has received 217 loans totaling $12,679 million, of which 61 were active at the end of 2002. Contract awards totaled $418.5 million, bringing the cumulative figure to $8,380.6 million. The contract awards ratio for 2002 was 14.1%—lower than the ADB-wide average of 22.6%. Disbursements in 2002 totaled $501.4 million, bringing cumulative disbursements to $8,862.6 million. The disbursement ratio was 23.2%—higher than the ADB-wide average of 22.2% (see tables 14–23 in the Statistical Annex).

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