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                                                       c       MIDGA.m                            June 11, 2001
                                                                  0                               ~~~~~~~~03:53:04
                                                                                                            PM




Statement by Andrei Bugrov
Date of Meeting: June 12, 2001

                     Pakistan: Country Assistance StrateyV Progress Report

We commend staff on the CAS Progress Report for Pakistan. We appreciate the clarity and conciseness
of the document. At the same time we find the paper to be quite comprehensive in terms of providing a
broad political, economic and social context within which the Bank is going to scale up its assistance.

Pakistan is a country of great development potential. The ability to realize this potential will depend
critically on strong commitment to sustainable and consistent refomis, and also effective donor
coordination and support for Pakistan's long-term vision for poverty reduction.

As we know Pakistan's past reform track record was uneven. Although progress was made in a number
of areas, particularly on trade liberalization and banking sector reform, and reversal of reforms has been
extremely rare, the country did not achieve several of its structural reform goals. Overall results in the
area of human development (for instance, in primary education, primary health, family planning, and
comnmunity infrastructure) remain disappointing despite the significant government and donor
investments. There were also repeated balance of payments crises and continuous deterioration of
extemal debt indicators which currently exceed those of the highly indebted poor countries.

Developments in Pakistan since October 1999 have been very promising. The new govemment has been
quite successful in its initial efforts to stabilize the economy. However growth prospects and
macroeconomic situation remain fragile, particularly because the mid-term macroeconomic framework
depends on significant financing (of about US$1.5 billion per year) from the IMF, the Bank, and the
AsDB and the Paris Club rescheduling.

Significant progress has been made in implementing the new govemment's agenda to revive the
economy, arrest and eradicate endemic corruption, depoliticize state institutions, devolve power to the
grass-root level, and improve checks and balances and democratic processes in society. We are pleased to
note in particular that poverty reduction and good governance have been put at the core of the national
development strategy.

Also, there has been a substantial improvement in Bank portfolio performance. The number of "projects
at risk" went down from 52 percent in FY98 to 19 percent in FYOO, while commitments at risk
decreased from 54 percent in FY98 to 20 percent in FYOO. This highly commendable portfolio
performance turnaround has been achieved as a result of the joint efforts of the Bank and the central and
provincial governments.

All in all, we see a clear "break from the past" and "getting back on track" which provide a basis for the
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Bank to review its assistance strategy for Pakistan and increase its operational engagement according to
high base case scenario. We support the proposed program of assistance under this CAS Progress Report
which will support the reforms and help strengthen Pakistan's creditworthiness. We also note that the
proposed lending levels are within the IDA12 allocation for Pakistan.

We endorse the proposed Structural Adjustment Credit (SAC) which accompanies this Progress Report
and will support up-front implementation of reforms and provide the flexibility needed to manage risk in
an uncertain environment, while establishing the basis for long term engagement that will be discussed in
the upcoming full CAS.




This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents
may not otherwise be disclosed without the consent of the Executive Director concerned.