With current fiscal year almost finishing and another electoral season about to kick start this is probably the best time for the government officials to avail this last leg of funding to be received from World bank. Many skeptics have not really welcomed this funding with open arms as they are still weighing the fruits of three previous finding regimes given by the same organization in last three years. The implementation is those previous projects still remains a question mark.
This decision has been made in the context of inadequate implementation of those reforms which were introduced last year. The amount of USD 1.2 billion funding is divided in a three pronged instruments with USD 500 million to be disbursed early next week given specifically as a policy loan. An tranche of USD 100 million is directed for rehabilitation to reduce the risks of drought and floods in selected areas of Sindh while the last chunk of USD 420 would be given as a guarantee to get further loans from international markets. This commitment was made by WB in Islamabad today in order to support their cause of strengthening Pakistan’s Economic reform process. Another significant objective is to enable Sindh to become self sufficient in dealing with natural disasters by investing in precautionary measures.
Shedding some light on the conditions of this USD 500 million loan; it seems that the government has pulled some strings here and there in order to get WB to agree to this arrangement. One of them is to convert State Life Insurance Corporation into a company, their next condition is to list this insurance giant on the local stock exchange. The interest rate is 2% on the USD 500 million loan which is due in 25 years with a grace period of 5 years. This USD 920 million I.e. USD 500 and USD 420 million is given under The Competitiveness and Growth Development Policy Financing (CGDPF). Prime objective is to support government’s efforts to foster growth and investment for curtailing poverty and enhancing steadiness in the economy.
“The Government of Pakistan has made significant progress in stabilising the economy, initiating reforms for revenue mobilisation and drawing in the private sector for spurring growth,” said Illango Patchamuthu, Country Director World Bank for Pakistan. “It is now stepping up efforts through deeper reforms and an accelerated pace of implementation. This will improve the competitiveness of the economy, which in turn will create more and better jobs, lifting millions out of poverty.”
Task Team leader of the project, Enrique Blanco Armas further added, “The operation will support reforms that contribute towards accelerating growth and fostering an inclusive growth pattern. Reforms supported will improve the business environment and contribute to the development of the financial sector and reforms of state owned enterprises. The operation also supports efforts for improved fiscal management through increased revenues, better coordination of debt management and making public spending more pro-poor.”
The USD 420 million guarantee is provided to improve Pakistan’s chances of getting more funding from the international market. It will further boost business environment and ensure fiscal management is streamlined.
Another vital arm of this provision is Sindh Resilience Project (SRP) worth USD 100 million for reducing the adverse risks of all natural disasters which have brought massive devastation in the recent past. It has an array of programs such as physical reconstruction, beefing up fiscal resilience and other important developmental projects. This project will single handedly provide relief and support to 65,000 people which are at direct risk to drought and suffering food insecurity. This will be done through construction of small dams for rain water harvesting and recharging of groundwater reservoirs. Overall, an estimated 5 million people will be directly salvaged from flooding incidents.
Although these loans may sound like a good plan for the recent government as it will enable them to boast about their reforms and developmental projects with elections round the corner but the real challenge is to extend these projects to their implementation phase. Let’s hope this funding reaches the grass root level where it is needed the most.