IMF-approved government policies,
bolstered by generous foreign assistance and renewed access to
global markets since late 2001, have generated solid macroeconomic
recovery the last two years. The government has made substantial
inroads in macroeconomic reform since 2000, although progress on
more politically sensitive reforms has slowed. For example, in the
third and final year of its $1.3 billion IMF Poverty Reduction and
Growth Facility, Islamabad has continued to require waivers for
energy sector reforms. While long-term prospects remain uncertain,
given Pakistan's low level of development, medium-term prospects for
job creation and poverty reduction are the best in nearly a decade.
Islamabad has raised development spending from about 2% of GDP in
the 1990s to 4% in 2003, a necessary step towards reversing the
broad underdevelopment of its social sector. GDP growth is heavily
dependent on rain-fed crops, and last year's end to a four-year
drought should support moderate agricultural growth for the next few
years. Foreign exchange reserves continued to reach new levels in
2003, supported by robust export growth and steady worker
remittances.

Palau
The economy consists primarily of tourism, subsistence
agriculture and fishing. The government is the major employer of the
work force, relying heavily on financial assistance from the US.
Business and tourist arrivals numbered 50,000 in FY00/01. The
population enjoys a per capita income twice that of the Philippines
and much of Micronesia. Long-run prospects for the key tourist
sector have been greatly bolstered by the expansion of air travel in
the Pacific, the rising prosperity of leading East Asian countries,
and the willingness of foreigners to finance infrastructure
development.

Palmyra Atoll
no economic activity

Panama
Panama's dollarised economy rests primarily on a
well-developed services sector that accounts for three-fourths of
GDP. Services include operating the Panama Canal, banking, the Colon
Free Zone, insurance, container ports, flagship registry, and
tourism. A slump in Colon Free Zone and agricultural exports, the
global slowdown, and the withdrawal of US military forces held back
economic growth in 2000-03. The government has been backing public
works programs, tax reforms, new regional trade agreements, and
development of tourism in order to stimulate growth. Unemployme