Despite missed targets WB likely to lend $1b
The government is availing the programme loan for budgetary support
PHOTO: AFP
ISLAMABAD:
Even though the government missed almost all the targets it had to achieve by utilising the $1 billion loan it received from the World Bank (WB) earlier, the international lender will likely give Pakistan another $1 billion this month to help enhance growth in the country and reform its power sector.
A senior finance ministry official told The Express Tribune on Friday that the WB board of directors is set to approve a Development Policy Credit of $500 million for economic growth on June 19 and another $500 million on June 30 for the power sector reforms programme. The power sector loan will include $50 million that Japan will extend through WB, he said.
The lender’s decision to take the programme loan to its board for an approval will greatly relieve the beleaguered federal government.
After the Lahore High Court (LHC) struck down four separate electricity surcharges, WB had shown reluctance to approve the loans, another finance ministry official said. A panicking finance ministry subsequently challenged the LHC decision in the Supreme Court and managed to get relief after the latter suspended the high court order.
The WB loan will help the government achieve the Net International Reserves Target set by the International Monetary Fund (IMF) for April-June.
However, the intended purpose attached with these loans has not been achieved. The government is availing the programme loan for budgetary support and the money is not used for creating assets, unlike the project loans.
Pakistan Muslim League-Nawaz (PML-N) had come to power by promising to end load-shedding within two years. It failed to fulfill the promise due to its inability to introduce much needed reforms to reduce line losses and permanently address the issue of circular debt.
In a recent National Economic Council meeting, Finance Minister Ishaq Dar reportedly told Prime Minister Nawaz Sharif that load-shedding is shaving off roughly 2% growth every year.
WB also approved two loans amounting to $1 billion last May. These included $600 million for power sector reforms. The loan was approved to help reduce power subsidies, improve power sector performance and ensure accountability and transparency in power distribution and generation companies. But other than a reduction in the subsidies, which has been limited to budgetary books, progress towards these ends has not been encouraging.
A recent implementation and status result report of the $600 million loan reveals that the government failed to achieve the target of increasing bill collection. According to the report, bill collection by March this year stood at 88.5%, only 2.5% up from the June 2013 level. June 2016’s target is 94%, which the government is likely to miss.
Similarly, the government is supposed to increase gas supply to the power sector to five billion Standard Cubic Feet gas per day (CSFD) by June 2016. By the end of March, supplies stood at 4.1 billion, only 300 million CSFD up from the June 2013 level.
Under another condition, the government had to make the Central Power Purchasing Agency (CPPA) operational and independent by now to bring transparency in power generation and its purchases. However, this has not been done yet, according to the report.
The goals which could not be achieved under the first credit line are now proposed as the targets of the second power sector credit, according to the WB documents.
Published in The Express Tribune, June 13th, 2015.
Even though the government missed almost all the targets it had to achieve by utilising the $1 billion loan it received from the World Bank (WB) earlier, the international lender will likely give Pakistan another $1 billion this month to help enhance growth in the country and reform its power sector.
A senior finance ministry official told The Express Tribune on Friday that the WB board of directors is set to approve a Development Policy Credit of $500 million for economic growth on June 19 and another $500 million on June 30 for the power sector reforms programme. The power sector loan will include $50 million that Japan will extend through WB, he said.
The lender’s decision to take the programme loan to its board for an approval will greatly relieve the beleaguered federal government.
After the Lahore High Court (LHC) struck down four separate electricity surcharges, WB had shown reluctance to approve the loans, another finance ministry official said. A panicking finance ministry subsequently challenged the LHC decision in the Supreme Court and managed to get relief after the latter suspended the high court order.
The WB loan will help the government achieve the Net International Reserves Target set by the International Monetary Fund (IMF) for April-June.
However, the intended purpose attached with these loans has not been achieved. The government is availing the programme loan for budgetary support and the money is not used for creating assets, unlike the project loans.
Pakistan Muslim League-Nawaz (PML-N) had come to power by promising to end load-shedding within two years. It failed to fulfill the promise due to its inability to introduce much needed reforms to reduce line losses and permanently address the issue of circular debt.
In a recent National Economic Council meeting, Finance Minister Ishaq Dar reportedly told Prime Minister Nawaz Sharif that load-shedding is shaving off roughly 2% growth every year.
WB also approved two loans amounting to $1 billion last May. These included $600 million for power sector reforms. The loan was approved to help reduce power subsidies, improve power sector performance and ensure accountability and transparency in power distribution and generation companies. But other than a reduction in the subsidies, which has been limited to budgetary books, progress towards these ends has not been encouraging.
A recent implementation and status result report of the $600 million loan reveals that the government failed to achieve the target of increasing bill collection. According to the report, bill collection by March this year stood at 88.5%, only 2.5% up from the June 2013 level. June 2016’s target is 94%, which the government is likely to miss.
Similarly, the government is supposed to increase gas supply to the power sector to five billion Standard Cubic Feet gas per day (CSFD) by June 2016. By the end of March, supplies stood at 4.1 billion, only 300 million CSFD up from the June 2013 level.
Under another condition, the government had to make the Central Power Purchasing Agency (CPPA) operational and independent by now to bring transparency in power generation and its purchases. However, this has not been done yet, according to the report.
The goals which could not be achieved under the first credit line are now proposed as the targets of the second power sector credit, according to the WB documents.
Published in The Express Tribune, June 13th, 2015.