making public enterprises and a further decline in interest spending, this would create room to increase social and poverty-related spending. The report said the authorities believe that with the economy now growing at a faster pace, the rate of inflation in 2004/05 is likely to be marginally higher. The State Bank of Pakistan or SBP has started to moderately tighten monetary policy and stands ready to tighten more aggressively, should inflationary pressures continue to build, the report and added that the central bank has reduced its foreign exchange purchases in recent months and will implement a monetary policy aimed at slowing down the pace of monetary expansion. Structural measures in the period ahead focus on further strengthening tax administration and the forceful implementation of energy sector reforms, the report said and disclosed that the government is working with the World Bank on a medium-term adjustment programme to reduce the fiscal burden imposed by the power sector and to achieve expanded access, increased reliability, and lower costs. The report said urgent short-term actions include the completion of a transparent tariff setting mechanism and subsidy policy, and the development of structural recovery plans for the individual enterprises.
