ISLAMABAD: Economic affairs division has issued a clarification regarding a news report titled “Red Tape Blamed for Delay in Release of 2.3bn by World Bank”. It states that committed disbursement of $2.3 billion by the World Bank has been held up due to bureaucratic hurdles. Resultantly the story goes on to state that government is relying more on expensive short term loans from friendly countries to meet its foreign exchange needs.
It is clarified that the government has neither budgeted the estimates of US$2.3 from the world Bank during the current fiscal year nor does the data show such level of disbursement from the World Bank in a single year in the past.
Furthermore unlike the past, the government is not relying on short term commercial loans which are usually expensive and add to debt vulnerability of the country. On the contrary, friendly countries have placed time deposits with the Central bank of Pakistan at rates which are much lower than the commercial borrowing rate. These friendly deposits are on one hand augmenting official foreign exchange reserves while on the other saving significant cost of financing the reserve build up.
It is important to point out that short term commercial borrowing is not a substitute of development financing. The government resort to short term commercial borrowing only as a contingency measure to stabilize forex reserve while development financing is inexpensive and long term source of financing for completing development projects in multiple sectors of economy.
Actual inflows from multilateral and bilateral sources in FY2017-18 were US$4.784 billion as against budget estimates of US$6.094 billion. Budget Estimates of External Economic Assistance through bilateral and multilateral development partners for FY 2018-19 are US$4.6 billion. During the first seven months US$ 2.3 billion have been received as against US$ 2.6 billion during the same period last year. The original estimates have now been revised to US$ 5.6 billion which the government is committed to achieve by the end of June 2019 backed by portfolio reviews and stronger monitoring measures taken by the government.
The government is cognizant of the slow pace of disbursement of external economic assistance during the first six months of the current financial year. Pace of disbursement is usually slow during the first two quarters of the fiscal year.
The fiscal year 2018-19 saw a political transition and during that period there was initially suspension of development activities by the Election Commission of Pakistan and for quite many months project approving forums i.e. CDWP and ECNEC were not in place. Consequently various projects both on going and in the pipeline were adversely affected. The World Bank financing was also adversely affected due to introduction of hybrid financing instruments by the Bank and the capacity constraints of the implementing entities to achieve compliance with Bank procedures.
The government is confident of achieving the total target of US$ 5.6 billion by June 2019. For this purpose a vigorous monitoring and portfolio review activity is currently being taken on ongoing basis. Project by project specific issues are being addressed with the relevant stakeholders both at federal and provincial level. The Finance Minister is himself taking monthly portfolio review meetings unlike the past when such meetings used to take place quarterly.
