ISLAMABAD: The World Bank and Asian Development Bank have resumed loan programmes after four years hiatus.
Both these multilateral financial institutions had suspended concessionary loan programmes in 2010 when the IMF had cancelled its previous Standby Arrangement (SBA) programme during the tenure of PPP.
The World Bank’s Executive Board has approved Country Partnership Strategy (CPS) for Pakistan under which the Washington based Bank would provide $11 billion for various initiatives in next five years.
In the aftermath of striking deal with the IMF by securing $6.67 billion and successfully getting three tranches, the WB has lauded the government’s performance for pursuing economic reforms including a stronger focus on private sector involvement and other poverty alleviating measures.
The WB recognized that despite difficult economic situation, the incumbent government’s reforms are going in right direction which are inevitable to lead the country on the path to economic recovery and stability.
“The rising foreign reserves of Pakistan is a good omen, but what is critical now is to stay focused on the implementation of reform programme to create fiscal space for sustainable social protection programmes that support the poorest and most vulnerable people,” said the WB high-ups.
Successful reviews by the International Monetary Fund and the rapid implementation of initial reform actions are positive signs and the World Bank Group stands ready to help Pakistan through lending, private sector involvement and knowledge support.
The use of US $1.7 billion from IDA, the World Bank’s fund for the poorest, is part of the Bank’s support to the country. Target areas will be policy reforms in the energy sector, revenue mobilization, governance, social sectors, and investment into hydropower. The World Bank’s engagement in Pakistan will continue to be guided by its principle of selectivity, operational policy, and areas of comparative advantage.
The WB also welcomed Pakistan’s role in regional cooperation, for example on power connectivity with neighboring India, and the recently approved transformative power transmission project, Central Asia-South Asia (CASA1000).
On other hand, the ADB had also approved $400 million to help Pakistan end crippling power crisis.
Under the loan programme, Pakistan will undertake different reforms in power sector including rationalizing tariff and avoiding piling up of monster of circular debt as well as improving governance in this sector.
It will also back reforms to reduce power losses and encourage more sector involvement from the private sector and improving transparency and accountability.
The full programme is expected to total $1.2 billion, with future amounts subject to further discussions between ADB and the government.
For the first sub-program, co-financing from Japan of JPY5 billion ($49 million) and the World Bank of $600 million is expected. The full programme is due for completion by June 2018.
With resumption of loan program from both the WB and ADB, now the government will have to focus on key structural issues confronted by the economy to ensure higher growth trajectory. Meanwhile, the government will have to overcome lingering power outages to achieve turnaround of the economy on sustained basis.
