Pakistan's economy has made progress through tough reforms but still needs to boost tax revenues and increase power supplies to improve finances, the World Bank said on Friday. During two days of meetings with officials, including Abdul Hafeez Sheikh, the new Finance Adviser to the prime minister, World Bank Vice President for South Asia Isabel Guerrero noted substantial economic progress since her last visit in 2008. She noted Pakistan's reserves had rebounded, the World Bank said in a statement. But Guerrero said further action was needed. “To become independent of foreign aid, Pakistan needs to strengthen its own revenue generation,” she said in a statement. The government has pledged to keep the fiscal deficit at 4.9 percent of gross domestic product (GDP) in the 2009/10 (July-June) fiscal year under its agreement with the International Monetary Fund, but it has said it could rise to 5.3 percent. GDP growth this fiscal year is forecast at 3.3 percent but could go up to 3.4 percent, compared with 2 percent last year, officials say. But revenue collection is a chronic problem which successive governments have failed to come to grips with. Pakistan's tax-to-GDP ratio of 9.2 percent is one of the lowest in the world. The government aims to raise it to at least 15 percent. Shaikh, a former privatisation minister, will be put to the test as Pakistan's weak government attempts to energise a struggling economy battered by a Taliban militant insurgency and starved of foreign investment. He must also try to strike a balance between policy demands by the IMF, which provides critical financial support for Pakistan, and the government's desire not to alienate voters who could be hurt by those policies. “The World Bank will provide strong support to expand power supply in the coming years, and at the same time, work with the sector to continue to improve its financial health and quality of services,' said Guerrero. Pakistan clinched an emergency loan package of $7.6 billion with the IMF in November 2008 to avert a balance of payments crisis and the Fund is likely to approve disbursement of the delayed fifth tranche next month. Separately, a US official said Treasury Secretary Timothy Geithner will discuss economic stability, financial investment and building up infrastructure when he visits India next week. Geithner will meet with Indian Prime Minister Manmohan Singh and take part in the first meeting of a new US-Indian economic panel in the capital New Delhi and also visit Mumbai, a senior Treasury Department official said. The vice chairman of the Federal Reserve, Donald Kohn, and other U. officials also will be on the trip. The April 6-7 visit is part of a US effort to deepen the relationship with India. In Mumbai, Geithner and the other US officials will talk to Indian entrepreneurs and chief executives of leading companies. Geithner, who is making his first trip to India as Treasury chief, will discuss challenges for the global economy and ways that India can move toward opening its economy to foreign investment, the official said in a briefing with reporters. He spoke on condition of anonymity.
