Funds worth $23b still pending

ISLAMABAD:

Foreign creditors and donors have not disbursed about $23 billion worth of loans and grants to Pakistan, some dating as far back as 15 years, including a $1.6 billion grant due from the United States under the Kerry-Lugar Act.

A major chunk of the funds, what the government called the “undisbursed balance as of September 2022”, could have been received by ensuring prompt implementation of the schemes. The disbursement of some of these loans was linked to the progress on the foreign-funded projects but others were delayed due to various bureaucratic hurdles, weak implementation and the country’s relations with the donors.

The funds, including grants worth $3.7 billion, remain outstanding at a time when Prime Minister Shehbaz Sharif and Finance Minister Ishaq Dar have been going pillar to post trying to arrange $5 billion to $7 billion to revive the IMF programme.

The revelations about the undisbursed funds were made in a Ministry of Economic Affairs quarterly report released this week that showed project-wise details of the schemes and funds still stuck.

According to the sources, the common factors behind such large unspent amounts were the slow process of government approvals, delays in loan negotiations, a lack of coordination between government agencies finalising procurement details, lengthy bidding processes and a lack of capacity of the executing agencies in contract management and project monitoring.

At the heart of each case lies the incompetent of bureaucrats dealing with the respective projects, including weak follow-ups from the centre. International creditors and donors committed these loans to Pakistan but their disbursements were pending, showed the official details. The country is also paying commitment charges against a certain chunk of the idle amount.

The IMF has not yet disbursed $2.6 billion of the $6.5 billion bailout package, as both sides remain unable to bridge differences. The IMF had initially given the $6 billion loan package until September 2022, which it extended for nine months with only $500 million in additional financing.

The programme, however, has gone off track again and the Pakistan Democratic Movement led government failed to honour the revised schedule agreed with the global lender in August last year.

The 9th review had to be completed by November 2022, which is still lingering. The dates for the 10th review, for a tranche worth $750 million, was February 3, 2023 – a timeline that has already lapsed, as the 9th review remains incomplete.

This week, Dar and State Bank of Pakistan (SBP) Governor Jameel Ahmad could not give a firm date for reaching staff-level agreement yet again.

Pakistan is going from pillar to post to acquire foreign commercial loans but the official report shows some disturbing aspects about the non-disbursement of this foreign commercial loan. A foreign commercial loan worth $440 million from the Suisse AG led consortium remains undisbursed despite the closing date of the loans having lapsed from 2017 to 2022, according to the ministry’s report.

The US has not disbursed a grant worth $1.6 billion, mostly committed under the $7.5 billion Kerry Lugar Act in 2010 to help the then-civilian government. The grants had been committed in areas of rural development, social protection, democracy, energy, municipal services, and road infrastructure schemes.

Of the 42 incomplete projects, 36 have already lapsed, indicating that their development objectives could not be achieved.

The $535 million UK grant remained undisbursed despite the completion period of all the schemes having already passed many years ago. Some of these projects had begun back in 2007.

The maximum amount of $6.7 billion remained undisbursed by the World Bank, mainly because of slow progress, and also partly due to the usual long project completion durations. Pakistan failed to avail of some of the World Bank loans meant for reducing energy sector losses.

The Karachi Port Improvement project had to be closed financially by June 2018 but some amount remains pending for disbursement. Similarly, the $157 million Dasu Hydropower project, which began in 2014, should have been utilised by August 2022 but remains outstanding, showing the inefficiency of the Water and the Power Development Authority (WAPDA).

Disbursements worth $4.8 billion against the Asian Development Bank (ADB) funded project remain outstanding as of the first quarter of the current fiscal year. Some of the ADB projects also dated back to 2006-07 and their gestation periods have long been completed.

China has also not disbursed $1.4 billion in loans, including $345 million for the Karachi Nuclear Power Plants whose financial close date lapsed in June last year.

Despite the lapse of time, a sum of $244 million has not been disbursed by the European Investments Bank because Pakistan failed to show progress on three water sector projects.

The country has failed to utilise the $554 million grant from the European Union and the financial closing dates of all EU-funded projects have lapsed now. The EU had given the grants for rural development, education and health sector projects. A German grant of about $236 million for various social sector projects remained undisbursed despite a majority of the projects having lapsed. Japan has also not disbursed loans and grants worth $321 million against projects, many of which have already lapsed, according to the details released by the ministry.

Saudi Arabia has not disbursed $743 million against 18 projects, of which the period of 17 schemes have already completed.

Published in The Express Tribune, March 11^th, 2023.

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