PHOTO: AFP
The World Bank has approved a $500 million loan to support privatisation and revenue mobilisation efforts but delayed the second tranche of the same amount that was due for energy sector reforms, underscoring the government’s lack of progress in turning around the energy sector over the last two years.
The World Bank’s refusal to approve the Development Policy Credit II tranche of $500 million for energy sector reforms before June 30 came on the heels of the Asian Development Bank’s decision to postpone the approval of a $400 million loan for the same purpose.
After a meeting of Senate Finance Committee last week, Finance Secretary Waqar Masood had claimed that the Washington-based lender would approve the $500 million loan for the energy sector on June 30 and the amount would be transferred to State Bank of Pakistan’s accounts the same day.
However, after signing the $500 million development policy credit for growth in Washington on Thursday, Jalil Abbas Jilani, Pakistan’s ambassador to Washington, told APP that the agreement for the $500 million loan for energy sector reforms would be signed in September this year.
It also seems as though the Ministries of Finance and Water & Power are not on the same page. “The power sector loan will be negotiated in the next quarter,” said a Water and Power Ministry spokesman on Friday.
The ADB and the World Bank are closely working to address structural bottlenecks in the energy sector in Pakistan. Many economists and analysts were surprised when the Finance Ministry had claimed that the World Bank would extend $500 million for the power sector despite the ADB’s refusal to do so this month.
The World Bank spokesman did not comment on the timeline of the loan for the energy sector. The Finance Ministry had not responded to requests for comment by the filing of this report.
Both lenders’ biggest concern is the financial viability of the power sector, according to the officials. They added the government had not taken concrete steps to remove the structural bottlenecks and all the steps that have been taken so far are ad-hoc, including levying four separate electricity surcharges. The lenders also delayed the approval of $900 million in loans, including the ADB’s $400 million, due to the delay in making the Central Power Purchasing Agency operational.
The delays will severely dent the government’s efforts to build foreign currency reserves to the satisfaction of the International Monetary Fund for April-June period of this year.
Meanwhile, the World Bank approved a 25-year, low-interest $500 million loan to boost economic growth through fostering private and financial sector development, and mobilising tax revenue to expanding the fiscal space to meet social needs.
“The operation will contribute to the government’s strategy for further accelerating economic growth, increasing private investment, expanding financial inclusion, enhancing the openness of the economy, and ensuring fiscal consolidation while strengthening BISP programs and provincial social spending,” said Rachid Benmessaoud, World Bank Country Director for Pakistan.
The $500 million under Fiscally Sustainable and Inclusive Growth is the second in a series of programme loans. The first loan of $400 million was disbursed last year, addressed critical institutional and regulatory changes needed to jumpstart reforms. The second loan brings depth and sustainability to most actions of the first credit, while addressing new reforms on inclusion and governance, said the World Bank.
Published in The Express Tribune, June 19th, 2015.
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