'No flood projects to tap $11b Geneva pledges'

ISLAMABAD:

Finance Minister Muhammad Aurangzeb said on Wednesday that Pakistan failed to develop investable flood-related projects to benefit from the $11 billion pledged at the Geneva conference nearly three years ago, a lapse that highlights the gap between the government's desire to secure aid and its ability to effectively use it.

The minister was speaking at a conference on "Building a Resilient Public Financial Management Ecosystem" organised by the Institute of Chartered Accountants of Pakistan (ICAP), on a day when heavy rains inundated parts of Punjab.

The province is facing an unprecedented flood emergency triggered by torrential rains and India's release of water.

"Let's accept that we could not come up with investable projects" to make use of the billions pledged in Geneva, Aurangzeb said. He questioned whether national institutions had learned any lessons from the devastation of the 2022 floods, once again stressing that Pakistan faces two existential threats, climate change and the exploding population bomb.

The 2022 floods caused damage estimated at $30 billion, including reconstruction costs. Aurangzeb noted that the current floods are again expected to cause billions of dollars in damage.

His remarks came a day after the Economic Affairs Ministry submitted a report to the Public Accounts Committee on the utilisation of flood pledges, showing that against $6.4 billion pledged for project financing, actual disbursements were only $2.8 billion.

The foreign lenders had committed a total $11 billion, out of which $4.6 billion was for oil financing and the remaining $6.4 billion had been given for spending on the rehabilitation and reconstruction.

The details showed that the World Bank pledged $2.2 billion and has so far disbursed $1.6 billion. The Asian Development Bank committed $1.6 billion but has so far released $513 million. Likewise, China and the Asian Infrastructure Investment Bank (AIIB) pledged $1.1 billion, but so far gave only $250 million in the absence of any credible financing projects.

The Islamic Development Bank promised to give $600 million but released $231 million. Paris Club countries pledged nearly $800 million but released $139 million. The United States promised to give $100 million and gave $70 million.

Meanwhile, heavy rains in the upper catchment of the Chenab River have swelled downstream flows, putting thousands of citizens at risk. Based on input from India, the Ministry of Water Resources issued flood alerts for the Sutlej, Ravi and Chenab rivers.

Aurangzeb warned that unless Pakistan took the challenges of population growth and climate change seriously, it would fail to achieve its vision of becoming a $3 trillion economy by 2047, the centenary of the nation's independence.

ICAP Recommendations

At the conclusion of the conference, ICAP presented recommendations to strengthen Pakistan's public financial management.

It has recommended restructuring the National Finance Commission award, saying that the current award has given birth to unsustainable fiscal imbalances.

The biggest issue is the expenditure, and the federal government is still spending Rs1.2 trillion annually on the subjects that fall in the provincial domain, said Shahid Kardar, former Governor State Bank of Pakistan, while speaking during the conference.

Kardar further added that the International Monetary Fund had a misplaced focus on the tax-to-GDP ratio and the primary balance, which ignores the issue of expenditures in areas that are not the responsibility of the federal government.

The pension liabilities of the federal and the provincial governments have surged to a record Rs33 trillion, excluding the liabilities of firms like power distribution companies, Railways and PIA, said Kardar.

Muhammad Aurangzeb said that in the first phase, the government has stopped bleeding, as from July last year, the new recruitments in the public sector are on the basis of a contributory pension system.

The conference also recommended strengthening the FBR by freeing it from external influences. There have been many entities that are advising the FBR with no real outcomes, like the IMF, the World Bank, the ADB, Mackenzie and the United Kingdom under its REMIT project.

ICAP President Saifullah said that only the annual cost of tax exemptions was Rs5.8 trillion, while the accumulated losses by the state-owned enterprises have increased to Rs6 trillion.

He said that the economy has stabilised, but the real issues like SOEs reforms, resolution of the circular debt and privatisation remain unaddressed. The fiscal buffers are weak, the privatisation has been stalled, and the tax-to-GDP ratio is stuck at 10%.

"Our headline may sound positive, but the foundation remains shaky", the ICAP president said.

He reaffirmed ICAP's commitment to fostering transparency and strengthening institutional capacity across Pakistan's public sector.

Khalid Rahman, chairman ICAP Public Sector Committee and Council Member, termed the ICAP conference a milestone in advancing Pakistan's fiscal governance and institutional resilience.