World Bank signals $2b loan
The World Bank on Saturday hinted at giving Pakistan a $2 billion loan for the rehabilitation of people and repairing/rebuilding infrastructure affected by the devastating floods – an amount that Pakistani authorities say does not constitute as additional support to Islamabad.
The Washington-based lender made these intentions public at the end of the visit of its Vice President for the South Asia Region, Martin Raiser, who concluded his first official visit to Pakistan. He reaffirmed the Bank’s commitment to supporting the people of Pakistan in the wake of catastrophic flooding, according to a statement issued by the local office of the World Bank.
The World Bank has said that as an immediate response, it is repurposing funds from the existing World Bank-financed projects to support the urgent needs in health, food, shelter, rehabilitation, and cash transfers.
“In addition to this, we are working with the federal and provincial authorities to prepare emergency operations to quickly start reconstruction and rehabilitation to rebuild or repair infrastructure, housing and restore livelihoods, and to help strengthen Pakistan’s resilience to climate-related risks,” it added “We are envisaging financing of about $2 billion to that effect,” said Raiser.
Pakistan has already budgeted $2.6 billion of World Bank financing, including $1.4 billion out of the International Development Assistance – 20 quota – for the current fiscal year. An official of the Pakistani team, who was part of the discussions with the World Bank, said that the lender had not yet committed to extending any substantial new financing.
The World Bank has indicated repurposing the loans that were on the verge of cancellation or it wanted to reprioritise the existing IDA-20 portfolio, said the official. He added that this should not be conceived as additional help by the World Bank.
Pakistan wants that the World Bank front-load its three-year IDA quota and dove-tail it with flood-related spending. It was also keen that the contingent emergency response component of the World Bank lending be activated for flood-related spending by the lender.
Against the envisaged $2.6 billion annual financing, the World Bank disbursed only $118 million during the July-August period of this fiscal year, according to the Ministry of Economic Affairs.
The World Bank vice president also expressed solidarity with Pakistan for the loss of lives incurred. “We are deeply saddened by the loss of lives and livelihoods due to the devastating floods and are working with the federal and provincial governments to provide immediate relief to those who are most affected,” said Raiser.
During his two-day visit, Raiser met with the federal cabinet ministers, Governor State Bank of Pakistan Jameel Ahmed, Chairman National Disaster Management Authority Lieutenant General Akhtar Nawaz as well as representatives from think tanks and the private sector. In these meetings, Raiser discussed in detail the impact of the floods in Pakistan and the World Bank’s support.
He highlighted that Pakistan was amongst the world’s top ten countries most affected by climate change. He also encouraged the government to continue focusing on the successful implementation of ongoing investments in areas like girls’ and boys’ learning, health, reduced stunting, social protection, energy transition and climate resilience to lay the foundation for a sustained recovery from this year’s flood disaster.
Besides, Raiser met with Sind Chief Minister Murad Ali Shah and discussed the impact of the massive rains and recent floods, and how the World Bank was supporting the government of Sindh in its reconstruction and rehabilitation efforts. During his visit to Sindh, Raiser was given the opportunity to see first-hand the extent of damage and meet with the affected households at a relief camp in Daddu District.
The World Bank’s Country Director for Pakistan Najy Benhassine and International Finance Corporation Country Manager Zeeshan Ahmed Sheikh were also present at the meeting. The sources said that Pakistan also took up the issue of decoupling the two-policy loans amounting to $1.05 billion that the World Bank wants to approve together.
Besides, the Washington-based lender wants to club the approval of a $450 million second Resilient Institutions for Sustainable Economy (RISE-II) budget support loan and a $600 million second Programme for Affordable Energy (PACE-II).
It was learnt that Pakistan had requested that at this stage, the approval of a $450 million RISE-II policy loan should also be considered during the month of October, the government was ready to make a roadmap for the implementation of the conditions set for the PACE-II loan of $600 million.
The conditions for RISE-II loan pertain to the country’s fiscal and macroeconomic framework, involving the provinces too. The approval of the RISE-II loan will also unlock a $450 million loan from the Asian Infrastructure Investment Bank (AIIB) without fulfilling another set of conditions.
Published in The Express Tribune, September 25th, 2022.