Political consensus must for sustainable growth

ISLAMABAD: The World Bank’s outgoing Country Director Illango Patchamuthu has pointed out major weaknesses in implementing donor-funded projects in Pakistan resulting in undisbursed amount of $7.5 billion out of existing $11.6 billion portfolio. He also said political consensus was necessary for achieving higher and sustainable growth in Pakistan. He said the government wanted to renegotiate power generation cost with the IPPs but it could start benchmarking with those power plants working under supervision of public sector controls then other private sector IPPs could be negotiated later on stage.

He said 50 percent power generation was done by public sector so first the government should negotiate reduced power generation cost to come up with a rationale benchmarking.

“The World Bank is expected to lend close to $8 billion to Pakistan over next three years under fresh IDA cycle” the outgoing WB’s Country Director Illango Patchamuthu said in an exclusive interview with The News here at Bank’s office last week before his departure from Islamabad after completing his five year term in Pakistan.

He said that the World Bank was advising for targeted subsidies for power sector as currently 75 percent consumers were getting subsidized power rates that could not justified on any account. There is need to introduce targeted provision of subsidy mechanism with the help of database and number of units of power consumers for less tariff to be reduced from existing first 300 to 200 units.

He said Pakistan experienced boom and bust cycles because the economy plunged into macro-economic instability. However, he appreciated the country’s performance on account of ease of doing business where Pakistan’s ranking improved significantly. He said that the country lacked proper infrastructure and cited example of Karachi flooding exposing vulnerability of major urban center of the country.

“Pakistan cannot achieve sustained growth without undertaking political consensus and deepening of structural reforms” he said and added that the reform in FBR was necessary to tackle fiscal woes under which harmonization of General Sales Tax (GST) on both goods and services were required to move forward in the right direction.

Dwelling upon monster of circular debt, he said that there were several reasons but higher generation cost was one of the major contributors for escalating the circular debt. He said higher generation cost, generation and distribution sector problems, collection of bills and inefficiencies were adding to the miseries of power sector. He said that WAPDA was unbundled but it was done in half way so these unfinished reforms could not provide dividends to overhaul this power sector.

There was need to go ahead with corportisation and reduce commercial losses, he said and added that the collection of billing stood at 90 percent that also needed to be improved.

He said that the renewable and clean energy should be focused more so that the country could meet energy requirements till 2030 through clean energy.

On macroeconomic stability and its linkage for budgetary support from WB and ADB, he said that the IMF program was in place and efforts were underway to accomplish second and third review. However, macroeconomic stability and letter of comfort was necessary for our program loans from the WB and it was hoped that the IMF program for Pakistan would be back on track.

The macroeconomic stability, he said, was considered necessary in order to create buffers through building up of foreign currency reserves and curtailing of current account deficit.

When asked about challenges on implementation front for donor funded projects, he said that the weak implementation and inconsistency was creating major hurdles as Project Directors (PDs) were changed frequently so it adversely affected the progress of implementing projects well on time.

He said that four Chairman FBR were changed in last one year and three PDs of FBR were altered so how the project in FBR could be pursued in coherent manner, he questioned?

He said that there were 11 Federal Secretaries into Economic Affairs Divisions (EAD) were changed during his stay in Pakistan so implementation of projects could not be improved with consistency.

Secondly, he said the center and provincial coordination was not at its best. The implementation capacity needs to be enhanced, he maintained.

In the ongoing IDA (concessional lending) cycle, he said that Pakistan’s lending share stood at $7.4 billion and next IDA cycle finalized for next three years from 2021 to 2023 whereby Pakistan’s share increased to about $8 billion.

“With improved macroeconomic stability and better implementation, Pakistan can maximize disbursements in months and years ahead” he added.

Out of existing portfolio of $11.6 billion, the un-disbursed amount stood at $7.5 billion for ongoing 51 projects. In last fiscal year the disbursement from the WB stood at $1.3 billion. He said that the cost of IDA and IBRD remained almost same because of reduced rate of LIBOR (London Inter-bank Offered Rates) so the country like Pakistan could increase disbursements through project and program loans through improved macroeconomic stability and strengthening of implementation capacity.

Some projects, he said, the money would be disbursed on outcome-based approach as the executing agency would have to implement first and then the money would be provided such as some components of Pakistan Raises Revenue (PRR) would be based upon outcome based approach.

When asked about regional connectivity, he said that Khyber Bypass Project, CASA-1000 and some border facilitation projects were part of regional connectivity projects.