ISLAMABAD: The World Bank (WB) Group has now approved a package of assistance worth $1 billion to support Pakistan’s economic reforms, besides giving it $11 billion under a five-year Country Partnership Strategy.
However, it has declined to finance the much-needed 4,500MW Diamer-Bhasha Dam during the next fiver years (2015-2019).
The assistance package, which was approved by the WB Board of Directors on Thursday, consists of two Development Policy Credits (DPCs) to support the Pakistani government’s efforts to improve the power sector, and reinvigorate growth and investment for reducing poverty and creating shared prosperity. However, Pakistan faced a serious setback, as the WB’s CPS 2015-2019 did not include financing of the Diamer-Bhasha Dam that has the capacity to produce 4,500MW electricity to bridge the widening demand and supply gap of electricity.
Addressing a press conference through a video link from Washington, World Bank Country Director for Pakistan Rachid Benmessaoud said the government should give independence to NEPRA towards determining power tariff, and that there was no connection between the approval of the loan and the increasing power tariff.
He also said poverty trend in Pakistan was on the declining side, as the government had initiated several programmes for poverty eradication.
“Helping Pakistan in deepening multi-sectoral policy reforms and performance-based investments in the social and human development sectors has guided the bank group’s assistance strategy in Pakistan over the last few years,” said Rachid Benmessaoud, adding, “In formulating the new Country Partnership Strategy, a wide range of stakeholders, including civil society, media, youth, parliamentarians, and federal and provincial governments, were consulted.” He also said the new strategy was structured to help the country tackle the most difficult, but potentially transformational, areas to reach the twin goals of poverty reduction and shared prosperity.
Benmessaoud also said the WBG’s Pakistan Country Partnership Strategy was anchored in the government’s framework of 4Es – energy, economy, extremism and education – and the initial priorities of the incoming Vision 2025.
Enough flexibility has also been built into the strategy to allow for quick reallocation of resources in case of unforeseen needs or emergencies.
Giving details of the assistance, the World Bank country director said that the WBG had approved a package of assistance worth $1 billion to support Pakistan’s economic reforms. Talking about the assistance of $1 billion, the country director said that $600 million (with additional co-financing support of the Asian Development Bank and the Japan International Credit Agency) supports Pakistan’s goal of developing an efficient and consumer-oriented electric power system that meets the needs of its people and economy, sustainably and affordably.
The two credits are financed by the International Development Association (IDA), and would be on standard IDA terms, with a maturity of 25 years, including a grace period of 5 years.
Meanwhile, the Finance Ministry released a handout stating that the World Bank loans were purely concessionary in nature with repayment schedule spanning over a period of 30 years, including a five-year grace period, and the interest rate would be nominal at the rate of 2% per annum.
It is expected that $1 billion would be transferred to Pakistan during the next week, and it will increase Pakistan’s forex reserves substantially. The WB loan will incur 2% interest per annum and the Government of Pakistan would be saving net 10.5% in payment of interest on Rs 100 billion. Resultantly, there will be no net increase in the overall public debt.
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