Yet another reform project!

The World Bank’s self-evaluation of its Country Partnership Strategy is moderately unsuccessful

It seems no lessons have been learnt from past experience. The government has given its nod to a $22.5 million Public Sector Enterprises Reforms loan from the ADB. The stated purpose is to introduce reforms to improve governance in the power sector and privatise state-owned entities. In its eagerness to get support for the budget, as well as balance of payments, the finance ministry, over the years, has pushed itself into the driver’s seat in matters of economic reform and development assistance. The Poverty Reduction Strategy Paper Secretariat and the Economic Reform Unit are housed in it precisely for that reason. When people ask where all the aid money has gone, the answer before the so-called Washington consensus in the early 1990s would be simple. The government was able to point towards concrete projects, such as dams, canals, power stations, transmission lines, hospitals, etc. Since the consensus, the philosophy of aid has changed. The role of the state and its ability to carry out projects was called into question. Its role was to be limited to facilitation of the private sector and creation of institutions necessary for the development of the market. Deregulation, liberalisation and privatisation became the name of the game. Economic reform now meant fixing the size of the government and making what is left of it, more efficient.



While hard projects would be done by the private sector, the aid money was channelled to the government for reforming the social sector, the banking sector, setting up of regulatory authorities, tax machinery, civil service and the preparation of public-sector enterprises for eventual privatisation. From project aid, the aid money was diverted to programme lending and support to reform. These inflows are in the nature of budget support. In theory, it permits the government to exercise autonomy in prioritisation. However, the fungibility of resources has mostly been used to create space for political favourites. Despite being concessional, such lending is more burdensome than project aid. Lending for projects creates capacity for servicing debt in the future. Lending for programmes and reforms does not generate any financial returns to pay back.

What is worse, none of the areas picked up for reform have improved service delivery or outcomes. Social Action Programme II, Poverty Reduction Credit, Access to Justice Programme and Tax Administration Reform Programme (TARP) are but a few disaster stories of lending for reforms and programmes. The World Bank’s self-evaluation of its Country Partnership Strategy programmes for 2010-2014, aimed to improve economic governance, is “moderately unsuccessful”. In spite of the TARP, the Bank admits of the erosion of the institutional capacity of the Federal Board of Revenue. Tax-to-GDP ratio has been flat, if not downwards. Offices have been done up, IT hardware is much in evidence, and there is a lot of talk about customer care. The reality on the ground is that the newest e-filing portal, IRIS, has almost broken down in the last days of October.

The new forms made the entire confusion even worse confounded. No wonder, the next country strategy of the World Bank observes that the “reforms have been frontloaded in light of the country’s track record and past failure to follow through”. Economic reform, or any reform, for that matter, does not need loan money. First, it needs careful thinking at the expert level, then a political consensus and finally, an unfailing resolve of the government to go allout for it. In the case of reform, money does not make the mare go.

Published in The Express Tribune, October 31^st, 2014.

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