WB likely to approve $6.5b loan on July 8

After shelving it three times previously, the World Bank is likely to give clearance to a four-year lending programme worth $6.5 billion on July 8, which is billed to kick-start crucial power sector projects.

The executive board of the World Bank is meeting in Washington DC to approve the four year “Country Partnership Strategy 2010-14” after a delay of more than five months, sources in the bank said.

The strategy is designed to finance key projects in social and infrastructure sectors and promises some money for budget financing as well.

The Washington-based donor agency had postponed the approval of the key lending policy due to delay in carrying out power sector and tax reforms. Earlier, the executive board meeting was scheduled to meet on May 11 but it was put off indefinitely at the eleventh hour.

Due to resource constraints Pakistan is largely dependent on foreign loans to finance mega projects in the social and infrastructure sectors.

The government had wanted the approval of the policy before June 30 so that it could be assured of financing for some crucial power sector projects during the next fiscal year.

Out of the proposed $6.5 billion lending, the WB has promised to extend $1 billion per annum in the shape of project loans, which amounts to $4 billion till 2014. On top of that $2.5 billion would be provided as budgetary support, which had been suspended since 2008, apparently because of poor economic conditions.

Owing to delay in clearance of the lending policy, the WB also cancelled or postponed the approval of five loans of over $1.3 billion in the recent past, mainly falling in the infrastructure sector.

The Punjab Barrages Improvement Phase II project worth $145.6 million was  scheduled for the board approval for May 27 but was delayed till July. The project objective is to strengthen and modernize the Jinnah Barrage and affiliated works aimed at enabling reliable and uninterrupted supply of water for over 2.1 million acres of farmland.

The Fourth Tarbela Extension Hydropower project was scheduled for mid-April. The total cost of the project is $300 million and the proceeds could be used for budgetary support. The donor agency also postponed the approval of Karachi Port Improvement project worth $ 115 million. It was scheduled for board approval for May 13.

In the social sector, the Punjab Large Cities project worth $300 million got delayed for an indefinite period. It is designed to provide effective institutional and fiscal framework for the management and governance of metropolitan areas in Punjab. Similarly, the WB also delayed the approval of the North West Frontier Province Human Development project. The total cost of the project is $100 million and it was scheduled to go to the executive board on May 4. The Guddu Thermal Reconstruction project costing $200 million also got delayed. The objective of the project is to enhance the supply of electricity while reducing dependence on imported oil.

In the new CPS, the World Bank has hinted at financing the Dasu Hydropower Stage I project. The bank would lend $500 million for the first phase of the project. It is designed to add hydropower generation to the total energy mix, reducing electricity shortages. The bank may clear the project concept on September 14, 2010.

Under the proposed strategy, $200 million would be provided for Gas Efficiency and Production Enhancement Project. With the approval of the CPS, National Expressway Programme worth $634.5 million may get the required financing. The programme has been suspended for more than two years for lack of budgetary support. Plans to improve the trade corridor with a cost of $200 million will have to be reshuffled as well.

Published in The Express Tribune, June 22^nd, 2010.