ISLAMABAD: Pakistan has failed to take advantage of a concessionary financing window of the World Bank and received slightly over half of its projected cheaper loans of $1 billion in the last fiscal year.
The development comes as progress on majority of social sector projects remained sluggish.
The International Development Association (IDA) – the World Bank’s concessionary loans arm – disbursed $520.6 million to Pakistan in fiscal year 2017-18, according to data compiled by the Economic Affairs Division. The amount was about 54% of the authorities’ estimate of $968 million. IDA loans are given to poor-income countries for a longer period at nominal interest rates of around 1.25%.
In comparison, disbursements by the International Bank for Reconstruction and Development (IBRD) stood at $249 million against the budgeted estimate of $68 million. The IBRD, another concessionary loan arm of the World Bank, extends its loans on commercial terms to the middle-income countries, at six-month floating London Interbank Offered Rate (Libor). Pakistan receives a combination of IDA and IBRD loans every year.
Developing countries vie to avail their concessionary loan quotas due to low interest rates and repayments spanning over a period of at least 38 years. There are also some non-concessional IDA loans doled out to the projects entailing high rate of returns.
However, instead of availing cheap financing, Pakistani authorities focused on receiving loans from foreign commercial banks to finance its current account deficit. Against the budgeted estimates of $1.5 billion, Pakistan received loans worth $3.7 billion from foreign commercial banks for a maximum period of three years, at interest rate of Libor plus 3%.
For fiscal year 2017-18, Pakistan had estimated that the international lending institution would disburse $1.03 billion loans, which includes concessionary loans of $968 million and commercial loans of $68 million. However, actual disbursements remained at three-fourths of the estimates, despite some projects receiving significantly higher than the projected financing.
Payment of commitment charges on an undisbursed, but approved loan amount has remained a big issue for Pakistan. The projects in all sectors have been facing delays due to administrative bottlenecks and delay in award of contracts. Lenders also take more than the required time in scrutiny and finalisation of contractual documents.
