Pakistan Poverty Reduction and Economic Support Operation (PRESO)

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The aim of the Poverty Reduction and Economic Support Operation (PRESO) to the Islamic Republic of Pakistan will be to support the implementation of Pakistan's Second Poverty Reduction Strategy Paper (PRSP-II). Specifically, it will support the structural reforms o f PRSP-II to regain and maintain economic stability and to bring the economy back to a higher growth path over time through measures promoting competitiveness, while protecting the poor and vulnerable. The financing provided through the proposed PRESO will help to finance Government's budgetary needs, and thereby support the authorities' commitment to eliminate central bank financing of Government. While the International Monetary Fund (IMF)-supported Stand-By Arrangement (SBA) is providing Pakistan much needed balance of payments support, budgetary support is also urgently required. The economy grew at 7.3 percent on average per year during 2003/04 through 2006/07, driven by solid performances in the services and industrial sectors. The manufacturing sector grew fast during the earlier part of the period, but slowed down considerably later in the period due to capacity and infrastructural constraints. At the same time, the services sector, catering primarily to the domestic demand, grew steadily throughout the period. The factors that contributed to growth included a benign external environment availability of external financing, political and macroeconomic stability. Key measures include renegotiation of external debt with Paris Club creditors, pre-payment of extensive debt, greater reliance on concessional borrowing for new loans, and liberalization of the financial sector. They, together with an expansion in the economy, led to a decline in public debt as well as a reduction in debt servicing cost. Growth translated into rising household incomes, with per capita income growing to US$878 in 2006/07, an 18.3 percent increase from US$742 two years earlier. Beyond the rise in government subsidies, an overrun in interest payments by 0.9 percent of Gross Domestic Product (GDP) due to an underestimation of interest liabilities in the budget contributed to the increase in the budget deficit. The rise in the budget deficit will have been even higher without the 1.2 percent of GDP under-run in development spending.

FY17 - Energy and Extractives,FY17 - Financial Sector,FY17 - Public Administration,FY17 - Social Protection

World Bank Group

Project

Manufacturing (Industrial), Oil and Gas, Forest Products and Packaging, Government