IMF warns Pakistan to prioritise water resource management

The International Monetary Fund (IMF) said on Friday that water resource management has become more critical for Pakistan as the government searches for Rs3.3 trillion to complete mega dams early.

Water resource management in Pakistan has become even more critical than in the past, remarked Mahir Binici, IMF Resident Representative in Islamabad. He was addressing the closing session of a four-day conference organised by the Sustainable Development Policy Institute (SDPI).

His remarks came at a time when Pakistan faces a dual challenge: water aggression by India and climate change, causing abrupt disturbances in normal river flows.

The IMF country head said Pakistan faces water scarcity at certain times of the year whilst other parts of the year it has too much water. Three rivers flooded in summer, causing nearly Rs1 trillion in damages to infrastructure.

Sources said the civil-military leadership is also considering multiple options to build reservoirs. During a recently held session, the government pitched Rs3.3 trillion financing requirements to the provinces to build these dams by 2029-30. However, there was no consensus amongst provinces and the federal government about financing sources.

The federal government believes provinces should share its fiscal burden, although its Public Sector Development Programme (PSDP) could also be reprioritised by excluding politically motivated development schemes.

Discussions also took place during recently held closed-door sessions about the Water and Power Development Authority (WAPDA)'s role in constructing critical water infrastructure.

According to the Ministry of Water Resources, completing the Mohmand Dam would take 15 years and finishing work on the Diamer-Bhasha Dam would take over 20 years at the current pace of budget allocations. The government wanted to impose a 1% cess on the gross value of all local taxable supplies to raise additional funds, but the IMF did not endorse the plan.

Binici said Pakistan needs to invest 1% of its GDP in resilient infrastructure, which can reduce the economic impact of disasters like the 2022 floods. Such investment not only limits output losses but also accelerates recovery, helping the economy return to a growth path much faster than otherwise, said Binici.

The World Bank's country representative to Pakistan, Bolormaa Amgaabazar, said the 2022 floods caused damages in the range of $30 billion. Pakistan is highly prone to natural disasters and even recent floods have caused $2.9 billion in damages, which again is a significant amount, the World Bank representative said.

Dr Abid Qaiyum Suleri, Head of SDPI, said participants from regional countries, particularly from Bangladesh, opposed India's attempts to weaponise waters and urged regional cooperation in addressing such challenges.

As part of IMF conditions, from next year's budget, the government will improve project selection under the PSDP to address climate-related challenges.

Jason Avancena, Managing Director of Nestle Pakistan, said his company has invested over $30 million to play its part in climate resilience and promoting renewable energy.

The IMF country head also spoke about multiple challenges facing the economy. Pakistan is unique in certain ways, like some other developing economies, in that it has a very large state footprint absorbing scarce resources.

His comments came amid the government's plans to build a Rs213 billion hospital and a five-star hotel in Islamabad in the public sector.

Binici said Pakistan's various weaknesses and challenges have been compounded further by weather-related challenges.

Pakistan needs to address its weak revenue base, weak governance and expand its narrow export base for sustainable economic development, Binici said.

The IMF wants Pakistan to build sufficient fiscal and external buffers by September 2027 to ensure the country is on the path of sustainable development, Binici said. He said under the IMF programme, Pakistan needs to increase its tax-to-GDP ratio to 13.5% by 2027.