Pakistan PM urges donors for patience on reforms

Tuesday, 16 November 2010 23:18 - - {{hitsCtrl.values.hits}}

ISLAMABAD (Reuters) - Pakistan’s prime minister on Monday urged donors to give the country more time to carry out structural reforms, including widening the tax base, as it struggles to recover from its worst floods this summer.

Cash-starved Pakistan needs all the financial help it can get since the floods inflicted almost $10 billion (£6.22 billion) in losses, but donors’ mistrust over the transparent use of money has slowed donations, Pakistan’s finance minister said last week.

At the same time, donor and multilateral agencies are also linking the release of aid to Pakistan aggressively pursuing fiscal reforms to increase its tax base.

Prime Minister Yusuf Raza Gilani said his government was “firmly committed” to economic reforms but that they would take time.

“Please consider this as work in progress. Kindly be patient with Pakistan,” he said at the Pakistan Development Forum (PDF), organised to present Pakistan’s post-flood plans to donor countries and organisations.

“Your support and commitment is required over a much longer period, during which we can channel your assistance towards institutional and structural reforms.”

Even before the floods, Pakistan’s economy faced serious problems, surviving with the help of an $11 billion emergency loan secured from the International Monetary Fund in November 2008.

As part of conditions set by the IMF, Pakistan has removed subsidies from oil and food items and plans to enforce the reformed general sales tax (RGST) this year but that has faced resistance by politicians and businessmen.

Donors say while they are willing to help, Pakistan must take steps to reform its economy and generate resources of its own.

“To realise its economic potential, it (Pakistan) will have to implement some difficult short-term reforms to gain long-term benefits, said Andrew Mitchell, the British Secretary of State for International Development. He called for expanding the country’s tax base and said British taxpayers could not be expected to support Pakistan if its own taxpayers did not pay their dues.

Less tax revenue means Pakistan lacks resources to tackle problems such as security, acute energy shortages and poverty -- all of which could contribute to a growing militancy that is already raging in Pakistan’s border areas.

That has been a major concern of the United States which needs support of its nuclear-armed ally to stabilise Afghanistan, and has been the south Asian nation’s most generous donor during floods that left 10 million people homeless.

At the meeting, U.S. Special Envoy for Afghanistan and Pakistan, Ambassador Richard Holbrooke, said his government would fast-track $500 million for rebuilding efforts, drawn from a $7.5 billion multiyear package of civilian assistance already cleared by U.S. lawmakers. in September, the World Bank said that accountability and transparency will be of “paramount importance” to attract donor funding and the government must ensure transparency.

The lack of accountability has hurt past aid efforts. At a donors’ meeting in Tokyo in April last year, some $5.7 billion was pledged, of which only a fraction has arrived.