The World Bank has lent Pakistan $125 million (Rs10.8 billion) to help pay for aid to victims of the 2010 floods, even as Rs6.9 billion in donations remain unutilised in the Prime Minister’s Flood Relief Fund.
The executive board of the World Bank approved the loan, of which $81 million will carry a concessionary interest rate of 0.75 per cent. The remaining $44 million will carry a 3.2 per cent interest rate. The loan is scheduled to be repaid over a period of 35 years.
The government has obtained the loan to provide the second tranche of cash hand-outs of Rs40,000 per household to over one million households under the Citizen’s Damage Compensation Programme, which is expected to cost a total of Rs39.5 billion ($460 million). The remaining amount is expected to be provided by the United States and Italy.
The programme as a whole is expected to cost Rs160 billion. The government had initially decided to provide Rs100,000 to every affected household but may reduce that amount to Rs80,000 owing to delays in disbursement as well as differences with the provincial government over who would finance the programme.
The government has already disbursed Rs20,000 each to 1.4 million households. The total cost of the first phase, Rs20 billion, was borne by the federal government.
It remains unclear why the government has sought a loan from the World Bank when it has cash on hand already allocated towards flood relief.
According to sources familiar with the matter, Rs6.9 billion remains unutilised due to the National Oversight Disaster Management Council’s (NODMC) inability to work out a mechanism for transparent use of money. The council has held five meetings on flood relief and not once has it discussed the unutilised funds.
The National Disaster Management Authority has, in the past, voiced its concerns over a lack of funds needed to buy tents to shelter the flood victims. NOMDC officials have adopted a policy of not commenting publicly about their work, though sources familiar with the council’s work say that the money in the Prime Minister’s Relief Fund could be used for cash distributions through Watan Cards.
According to a Damage and Need Assessment report by the World Bank and the Asian Development Bank, the 2010 floods caused over $10 billion (Rs860 billion) in damages.
“The 2010 floods were a disaster of historic proportions that affected over 20 million people and created a massive recovery need,” said Rachid Benmessaoud, World Bank Country Director for Pakistan.
He said cash assistance to flood-affected households was essential to mitigate the adverse effects of income shocks besides addressing the issue of poverty and vulnerability. “The project will also assist in developing necessary capacities and systems to effectively handle the similar disasters in the future.”
Benmessaoud said that besides assisting Pakistan by financing the Post-Disaster Needs Assessment the WB was making available $300 million for fast-disbursing financing of critical flood-related imports and $20 million for highway reconstruction.
Published in The Express Tribune, March 31st, 2011.
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