Pakistan is set to receive $800 million loan in one month after assurances were given to World Bank (WB) to implement the remaining conditions. This development comes at a time when the country is expected to face a challenging external sector situation in the near future.
The assurance was given by Finance Minister Shaukat Tarin to Hartwig Schafer, South Asia Regional Vice President (SARVP) of the World Bank, who is on a four-day visit to Pakistan.
The release of $400m loan has been delayed by the WB after its approval while another tranche of $400m awaits approval due to Pakistan’s govt inability to meet conditions that were agreed upon with the IMF.
Finance Minister Tarin has assured the WB delegation that the country was ready to implement these conditions within one month.
“During the meeting, there was a review of the progress on World Bank’s two ongoing programmes ‘Resilient Institutions for Sustainable Economy (RISE-II)’ and ‘Program for Affordable and Clean Energy (PACE)’ as these programmes hold a central position in the government’s social and economic reform paradigm,” according to a statement issued by the Ministry of Finance.
“It was observed that the programmes are progressing satisfactorily, it added. The WB has given a new three-month deadline to implement new additional conditions for releasing the $400 million money or else the loan pact will be terminated,” it further added.
The government also had strained relations with the IMF in the last two months or so as both parties failed to come on an agreement for the 6th review of IMF talk. In order to address the concerns of the IMF, the Federal Board of Revenue would share a new plan with the IMF.
The energy ministry is also expected to finalise the revised Circular Debt Management Plan and share it with the IMF this month, the sources said. The government’s biggest claim of turning the current account into surplus has ended.
There is also a constant increase in the trade deficit, which widened 81.4% in the first month of the current fiscal year due to almost double the increase in imports compared to exports from the country. The import bill in July this year went up 47% to $5.4 billion against $3.7 billion over the corresponding month last year.
However, it will not be easy for the government to revive its relations with the IFIs. The main outstanding condition for releasing the $400 million approved loan is the final approval of the Indicative Generation Capacity Expansion Plan (IGCEP), which also links nuclear-based power generation with either cost-effectiveness or payment of subsidies by the government.
The government has requested the WB to provide $500 million each under the RISE-II, which the WB delayed due to provinces refusal to amend GST-related laws. There is a condition that the federal and provincial finance departments should issue implementing regulations following the approval of common GST laws passed by the federal and provincial assemblies to generate a harmonised GST for goods and services across the country.
For the $500 million RISE loan, the WB has set a condition that the provincial governments issue a notification adopting the FBR valuation tables applicable to Urban Immovable Property Taxes to keep the assessment ratios at 85% of market value.
Omar Ayub Khan, the minister for economic affairs, also met Schafer and discussed the future country partnership framework (2022-2026) for Pakistan.
The WB team also discussed the next five-year Country Partnership Framework (2022-2026) which focuses on girls and boys education, growing healthy, green, and clean Pakistan, growth, and governance (5G).
The economic affairs minister appreciated the WB’s continued support of Pakistan. He shared that 57 projects worth $12.9 billion are under implementation under WB’s financing in the priority areas such as education, health, social protection, finance, agriculture, energy, and communication across the country.
During the last fiscal year, the government signed 16 projects worth $3.64 billion with the WB.
Schafer appreciated the government’s economic policies and reform agenda. He emphasised on timely completion of the ongoing policy reforms and development projects.
He also commended the efforts of the Ministry of Economic Affairs in resolving the long outstanding bottlenecks and expediting the project implementation on a fast-track basis which is evident from the enhanced disbursement during the last fiscal year.