An International Monetary Fund (IMF) team led by Milan Zavadjil, Division Chief in the Middle East and Central Asia Department, today completed a staff visit as part of an ongoing dialogue with the authorities on Pakistan's economic reform program. The IMF supports the program with a three-year arrangement under the Poverty Reduction and Growth Facility (PRGF) that was approved on December 6, 2001. The combined sixth and seventh quarterly reviews were completed on October 27, 2003. Reviews are henceforth semi-annual with the next Executive Board meeting on Pakistan expected after a mission visits Pakistan in March 2004. Two-thirds of the total amount of SDR 1.034 billion (about US$1.4 billion) under the PRGF loan has been disbursed.

The mission team confirmed the favorable macro-economic outlook. Key financial and economic indicators under the program as of end-September 2003 remain on track. The 5.3 percent economic growth target for the current fiscal year will likely be achieved. The overall fiscal deficit during July-September was consistent with the quarterly target and Central Board of Revenue (CBR) receipts exceeded expectation. Poverty reducing expenditure registered a welcome acceleration. The staff team concurred with the authorities on the need to watch price developments carefully over the coming weeks to safeguard the gains achieved in restoring financial stability.

While the financial results of KESC and WAPDA benefited from favorable weather conditions during July-September, the underlying performance of these public electricity companies requires improvement. The staff and the authorities agreed on the need to expedite the unbundling of WAPDA into its constituent companies for improved efficiency and subsequent privatization and to finalize a transparent regulatory framework that will guide the sector.

Broad-based reforms remain crucial for higher economic growth. The completion of the privatization program for state commercial banks and increased market orientation of the National Savings Scheme (NSS) will help foster financial intermediation. Sustained efforts at better public service delivery and improved governance in a range of areas, including by implementing the reform program for CBR, remain important. The staff team looks forward to the publication of the authorities' Poverty Reduction Strategy Paper (PRSP) and the opportunity it offers for broader consensus building.