Decision time

This week in Islamabad, the Government of Pakistan and the international community came together for the first meeting of the Pakistan Development Forum in two years.  Just over three months since Pakistan’s devastating monsoon floods, it was a chance for the Government of Pakistan and the international community to take stock of the challenges facing Pakistan.  And to set the direction for both Pakistan’s government and the international community in helping Pakistan overcome those challenges and reach its full economic potential.

Britain’s Secretary of State for International Development, Andrew Mitchell took part in the Forum in Islamabad.  It was his third visit to Pakistan since Britain’s new coalition government took office six months ago, and his fourth visit this year.   Britain has been speedy and generous in its support for Pakistan.  The UK has been at the forefront of the flood response, committing a total of £134 million to provide emergency shelter, food packages and safe water and to help start the reconstruction process with support for farmers and for getting children back to school.    The British public has made its support for Pakistan clear, donating a further £64m (Rs 8.5bn) to the Disasters Emergency Committee appeal. 

The Forum highlighted the massive scale of the challenge that Pakistan faces after this summer’s devastating monsoon floods.  The Asian Development Bank and the World Bank presented their damage needs assessment.   Their conclusions were sobering.  They estimated that this summer’s floods had caused a total of $10bn worth of damage across Pakistan.  A minimum of $6.8bn is needed for repair, recovery and reconstruction across all sectors.  Most affected are Pakistan’s agriculture and housing sectors.  Agriculture and housing losses are estimated at $5bn and $1bn respectively.

Pakistan’s challenge was great enough before this summer’s floods.   Pakistan’s population is expected to increase by 85 million by 2030. Pakistan’s working age population is increasing by nearly 10,000 people every day.  That is 4 million people every year.   For Pakistan to create enough jobs for these people, the economy needs to grow at 8% per annum.  Over the past five years, growth has averaged just 4%.

The UK stands ready to increase its support to help Pakistan secure the vibrant, properous and strong future its people deserve.  But, as Andrew Mitchell told the Pakistan Development Forum this week, an exceptional package of reforms by the Government of Pakistan is essential to securing this future.  Without reforms to increase tax revenue and control public spending, the risks posed by large and persistent deficits – financed through ever greater levels of borrowing – are considerable and debilitating.  Inflation is likely to keep rising, and investor confidence – which has fallen 25% this year – will continue to be shaky.  All of which would destroy rather than create jobs.

The Government of Pakistan is making some tough decisions and beginning to make progress towards reform. The Reformed General Sales Tax Bill tabled in the National Assembly last week is part of the right approach.  Pakistan’s politicians need now to move to agreement and implementation. To build public confidence, it needs to be accompanied by continued measures to tackle corruption and improve the effectiveness of public spending. In order to stay on a positive path to long-term development Pakistan needs to take some tough choices to reform the economy to ensure sustainable economic growth which will reduce poverty and inequality and allow Pakistan to realise its potential. 

Finally, at this time of Eid-ul-Azha let me wish you and your families Eid Mubarak.