WB approves $500 million loan to boost economy

ISLAMABAD: The World Bank (WB) has approved at least one $500 million programme loan to boost Pakistan’s economic growth, while the availability of $900 million loan for the cash-bleeding energy sector from two multilateral donors till June 30 remains in the doldrums.
The government was eyeing $1.4 billion till end June 2015 out of which the World Bank has now approved $500 million for achieving the growth while the availability of the remaining $900 million seems in the doldrums.
Despite making tall claims, Islamabad has failed to convince the World Bank and Asian Development Bank for providing $500 million and $400 million loans respectively for the energy sector before till June 30, 2015 deadline in order to increase the foreign currency reserves and meet the financing requirement of budget deficit target.
Secretary Finance Dr Waqar Masood had claimed before a couple of reporters that all desired loans would be materialized by June 30, 2015, as everything was going well on this front.However, Pakistan’s Ambassador in the US Jalil Abbas Jilani had told reporters that the energy sector loan from the World Bank was expected to be approved in coming September.
On the ADB’s loan, an official claimed that the conditionality matrix was devised in such a way that the second phase reforms were difficult compared to the first ones.However, sources in the Finance Ministry say Pakistan will have to seek an administrative waiver for circulating required papers 15 days prior to the Board meeting which could not be done within the stipulated timeframe.
But sources in the ADB said both sides were finalising the programme and would present it once they evolve a consensus on policy matrix. Discussions are still going on, added the sources.
However, according to the WB’s announcement made here on Friday, the World Bank Group approved the Development Policy Credit (DPC) worth $500 million to boost the economic growth through fostering private and

financial sector development, and mobilising revenue while expanding fiscal space to meet social needs.
The Fiscally Sustainable and Inclusive Growth (FSIG-II) single-tranche policy credit is the second of a programmatic series of credits.The first credit addressed critical institutional and regulatory changes needed to jumpstart the reforms whereas the second credit brings depth and sustainability to most actions of the first credit, while addressing new reforms on inclusion and governance.
Under this programme, the revenue mobilisation actions address well-known structural weaknesses in Pakistan’s tax system, thereby creating fiscal space for priority social and development expenditures without raising tax rates, and lowering the government’s domestic borrowing needs.
In addition, the government is committed to successfully completing the first equity and strategic sales of its privatisation agenda, broaden the tax net and remove the Federal Board of Revenue’s legal empowerment to issue discriminatoryStatutory Regulatory Orders; approve a Customs Tariff Rationalization Plan; create the One-Stop-Shop for business registration; support the approval of a draft bill on private credit bureaus by the National Assembly; and increase Benazir Income Support Program (BISP) cash transfer benefit, while introducing conditional cash transfers in favor of primary school enrolment under it.
“Economic activity is picking up, inflation is significantly declining, tax revenue is increasing and fiscal deficit is narrowing down”, says Rachid Benmessaoud, World Bank Country Director for Pakistan.
“The operation will contribute to the government’s strategy for further accelerating economic growth, increasing private investment, expanding financial inclusion, enhancing the openness of the economy, and ensuring fiscal consolidation while strengthening BISP programs and provincial social spending.”
The FSIG series promotes inclusion by supporting measures to foster private investment for creating more and better jobs, raising access to credit, increase household incomes and consumption, reallocating expenditures to priority education and health expenditure for the poorest segments of the population, eliminating tax-exemption privileges; and efficiently targeting cash transfers on the poor and vulnerable.
“The FSIG-II also supports measures that promote greater fiscal transparency”, says Jose Lopez Calix, Task Team Leader of The Project.“Fiscal transparency helps to ensure governments make informed economic decisions and allows legislatures and citizens to hold governments accountable for their use of public resources. Public disclosure and easy access to external audit reports and in-year budget execution report are a key element of fiscal transparency.”
The credit is financed from the International Development Association (IDA), the World Bank Group’s grant and low-interest arm. It will be on standard IDA terms, with a maturity of 25 years, including a grace period of 5 years.