Economy grows 7 percent over last four years: PRSP II
FAISALABAD (May 07 2007): Prudent macroeconomic policies as documented in Poverty Reduction Strategy Paper-II (PRSP-II) and wide-ranging structural reforms underpinned Pakistan's economic turnaround. Seven years of consistent and transparent economic policies along with economic reforms have strengthened Pakistan's economy.
According to "Draft Summary of the Poverty Reduction Strategy Paper-II", released by Ministry of Finance, Pakistan's economy has grown at an average rate of almost 7 percent per annum over the last four years and positioned as one of the fastest growing economies in the Asian region.
The size of its economy has more than doubled (from $58 billion to $132 billion) and per capita income almost doubled (from $438 to $847) during the last seven years.
It has succeeded in reducing unemployment and poverty. The fiscal and external account balances have improved vastly and consequently there has been a sharp reduction in public and external debt burden. Pakistan also succeeded in building foreign exchange reserves, which provided much needed stability in its exchange rate.
It has now emerged as an attractive destination for foreign investment which is expected to touch the unprecedented level of $6.0 billion this year from a tiny $400 million in 1998-99 - a five times increase in foreign investment in just eight years.
Pakistan continued to pursue its privatisation programme with major strategic sales taking place during the last seven years.
It completed the Poverty Reduction and Growth Facility (PRGF) arrangement with the Fund ahead of time, did not draw the last trench, and exited from a financial relationship with the Fund. Pakistan has entered international capital markets to showcase its continuously improving credit story.
It has also entered international equity markets through the listing of the shares of public and private sector enterprises in international stock exchanges.
Most importantly, it has not only succeeded in reducing both urban and rural poverty but all attendant key social sector indicators have witnessed significant improvement during the last seven years.
Pakistan's Poverty Reduction Strategy has thus been a great success. It has witnessed an impressive economic turnaround in a relatively short span. The economic landscape of the country has changed and therefore, its challenges are also different now. How to sustain the ongoing growth momentum within a stable macroeconomic environment is the biggest challenge going forward.
Linked with this are the challenges of job creation, further reducing poverty and meeting the MDGs targets, strengthening the country's physical infrastructure to support 7-8 percent growth in the medium-term and, most importantly, how to reap the benefits of demographic transition that is currently taking place in Pakistan. With a view to addressing these challenges, the government has prepared a new Poverty.
Reduction Strategy - commonly known as PRSP-II. The lessons from the last PRSP clearly suggest that strong economic growth on a sustained basis in a stable macroeconomic environment is critical for job creation, poverty alleviation and improving social indicators.
The new PRSP (or PRSP-II) is built around the lessons learnt from the last PRSP but in a global setting, that is, capitalising on the gains of globalisation while minimising its negative spill over.
According to official sources, the paper in its present form is the abridged version of the new PRSP. The detailed version of the new PRSP will be released after further consultation with all stakeholders. This has been prepared after a consultative process with all stakeholders, involving numerous workshops and dialogues with communities.
Prudent economic policies and bold, wide ranging structural reforms over seven years have changed the complexion of Pakistan's economy. The economy is no longer fragile. It is healthier today than ever before; a $60 billion economy seven years ago, is now over $140 billion; private sector is buoyant, industry, exports, imports are growing at respectable rates; domestic markets have expanded on the back of strong consumer spending; the country's debt burden is reduced to one-half; foreign exchange reserves are at an all time high; foreign investment reaching levels never reached before, the confidence of foreign investors in future prospect is strong; credit ratings have continuously improved; and most importantly, unemployment and poverty have declined significantly and social indicators have also witnessed appreciable improvements. In short, a sea change has taken place in every aspect of the economy in a short span.
The journey from low growth and macro economic stability and then onwards to recovery growth and poverty alleviation has been an arduous one but the ingenuity, skills, determination and unwavering commitment of the leadership to a home grown national vision has transformed Pakistan's economy from fragility to a resurgent one.
The poverty headcount that stood at 34.5 percent in 2000-01 has come down to 23.9 percent by 2004-05 - a substantial decline of 10.6 percentage points. In absolute numbers the count of poor persons has fallen from 49.23 million in 2000-01 to 36.45 million in 2004-05 - a fall of 12.8 million.
Rural areas of the country have witnessed a higher fall in poverty, where the percentage of population living below the poverty line has declined from 39.3 percent in 2000-01 to 28.1 percent by 2004-05, while urban poverty fell from 22.7 percent to 14.9 percent during this period.
This substantial decline in poverty has been made possible by robust economic growth, combined with the rising expenditures on the 17 pro-poor sectors identified in the PRSP.
PRSP budgetary expenditures on the 17 pro-poor sectors amounted to Rs434.6 billion in 2005-06, while cumulative PRSP expenditures (budgetary as well as non-budgetary) during 2001-06 amounted to Rs1,441 billion, with the budgetary expenditures averaging 4.7 percent of the GDP during this five-year period.
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