ISLAMABAD -- Reducing poverty through increased spending on health and education, along with improved governance, are the keys to Pakistan achieving long-term economic growth, according to a new World Bank report.

The World Bank's poverty assessment report, received over the weekend, classifies one third of the country's population as poor and warns that the level of poverty in Pakistan changed negligibly in the 10 years to 1999.

While urban poverty fell slightly over the period, rural poverty persisted at about 36 percent, widening the gap between city dwellers and the 71 percent of Pakistanis who live in rural areas and are "being left behind".

Chronic child malnutrition in rural areas, for example, appears not to have changed in severity in 15 years, it said.

Social indicators in Pakistan -- which from 1960 to 1998 was the world's third largest recipient of official development assistance after India and Egypt -- have failed to match the country's economic progress, the long-term assessment found.

Compared with other countries of a similar per capita income or rate of growth, Pakistan's education and health indicators were depressed and stunting the country's long-term growth potential.

"School enrolment is lower in Pakistan, adult illiteracy is greater and child mortality is higher (compared to those countries)," it said.

A rising debt-servicing burden and increasing defense expenditures over the past 20 years had left scant money to spend on social services, but increased expenditure on health and education was nevertheless essential to achieve poverty reduction and macroeconomic growth, AFP reported.

The bank also found that obstacles to the implementation of public policies need to be removed, and underlying issues of governance addressed.

"Issues of governance, for instance in the form of the lack of accountability, are at the heart of many of the difficulties encountered in mitigating poverty and broadening access to social services in Pakistan," it said.

The report lauds the potential of the military government's introduction in 1999 of a major economic reform program aimed at addressing constraints to economic and social progress.

Its program in particular of devolving powers to local governments "when successfully implemented, holds promise for improved access to critical public services for the poor," the report said.

"Yet this devolution effort can be expected to succeed only to the extent that it solves fundamental governance problems that have bedeviled earlier efforts to improve service delivery," it warned.