Budgetary Reforms for Growth and Poverty Reduction in Pakistan

Webster’s Dictionary defines institution as “an established order, principle, law or usage as an element of organised society or of civilisation”. There are other interpretations of this term, depending upon the context for which the term is needed. For the purposes of the theme of this 19th Annual General Meeting of the Pakistan Society of Development Economists (PSDE), “Institutional Change, Growth and Poverty”, I find this well-crafted Webster Dictionary definition to be appropriate and adequate. There is now strong recognition that institutional reforms are necessary to sustain rapid growth and poverty reduction in developing countries. However, it is first necessary to identify and specify what these institutional reforms are. A number of systematic efforts to define institutions in an analytical context have been undertaken. For example, the World Development Report (WDR) 2002 of the World Bank focused on “Building Institutions for Markets” as the core theme of the report.1 There has been emphasis on aspects of institutions in other WDRs as well, including in the WDR 1997 on the Role of the State,2 the WDR 2003 on Environment,3 and the most recent WDR 2004 on Service Delivery.4 Each of the WDRs builds on the analysis of earlier WDRs and provides analysis of the institutional context of the development challenge in concrete terms to make associated reforms implementable. This is indeed a laudable effort and provides a fairly rich analytical base over which one can build on to move the institutional reform agenda forward.