(formerly IRIN News) Journalism from the heart of crises

UN survey highlights economic challenges

A new UN economic and social survey has underscored the need for government intervention in making the growth process more equitable in order to tackle poverty, noting a downward trend in unemployment and poverty rates in Pakistan in recent years - a country recording its third straight year of impressive fiscal growth in 2005.

"Given the widespread poverty, jobs and income growth alone would not impact positively on non-income poverty. The largest share of people, despite rapid urbanisation, still live in rural areas and most are dependent on agriculture," said the 'Economic and Social Survey of Asia and the Pacific 2006', a flagship annual publication of the United Nations Economic and Social Commission for Asia and the Pacific (ESCAP).

"Rural industrialisation, based on the processing of agricultural products, is thus the key to generate additional employment in rural areas," commented the ESCAP survey, which was released on Thursday.

Pakistan achieved an impressive GDP growth rate of 8.4 percent in 2005, the highest in the last two decades. Contributing to the acceleration were strong domestic demand, better weather conditions for agriculture, continuity of economic policies and a robust financial sector.

The ESCAP survey suggests sustaining a higher growth rate of 6.5 percent or higher is possible given supportive macroeconomic policies, renewed confidence of the private sector, greater fiscal discipline and a stable exchange rate.

In October 2005, the South Asian nation suffered a devastating earthquake resulting in a massive loss of human life, with property damage estimated at US $5.2 billion.

However, the quake was expected to have minimal impact on the country's growth rate, firstly because the contribution of the areas affected by the quake to overall economic growth was minimal and secondly reconstruction efforts currently under way are stimulating some key aspects of the economy.

But on the policy side, there remains a major challenge to convert generous international commitments of more than $6 billion, pledged at a donors' conference in November 2005, into contributions to create the machinery to effectively carry out the rehabilitation and reconstruction on a timely basis, the survey said.

Nevertheless, inflationary pressure strengthened considerably, as inflation rose from 4.6 percent in 2004 to 9.3 in 2005. The ESCAP survey projects a drop in inflation to about 8 percent in 2006 due to an improvement in supplies.

Although fertility rates were declining in all countries in South Asia, the ESCAP report noted, population pressure continued to be a serious problem in Pakistan. It is clear, therefore, that a comprehensive package of population policies and programmes was needed to tackle the problem of unemployment and poverty, the report said.

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