ISLAMABAD: The World Bank has disbursed $958 million in loans during the past year, an amount that falls short of Pakistan’s expectations due to the multilateral lender’s decision against giving another half a billion dollars for energy sector reforms.
During the fiscal year 2016-17 that ended last Friday, the World Bank disbursed $958 million including a policy loan of $302 million, said a spokesperson for the local office of the Washington-based lending agency. However, the disbursements were $572 million or 37% less than the estimates of the finance ministry.
The main reason behind the low disbursement was the World Bank’s decision not to approve $500 million worth of a sub-programme-III loan for power sector reforms. The lender also gave $200 million less than Pakistan’s demand under the programme of Fiscally Sustainable Inclusive Growth Development Policy Credit. It had approved $300 million for fiscal reforms programme. However, there were some projects where disbursements remained higher than budgetary estimates like Tarbella-IV extension project, reducing the gap between projections and disbursements to $572 million.
Due to financial constraints, Pakistan heavily relies on foreign lenders to meet its project financing and budgetary support requirements. After witnessing a shortfall in disbursements from traditional lenders, Pakistan heavily borrowed from foreign commercial banks. It obtained over $3.6 billion in foreign commercial loans including $700 million from Standard Chartered Bank during the last week of June.
The World Bank and the Asian Development Bank (ADB) provided over $2.2 billion loans for energy sector reforms during almost three years. In the first two packages, totaling $1.9 billion, the World Bank and the ADB had both given policy loans for the energy sector. However, the World Bank did not support the sub-programme-III while the ADB approved $300 million last month.
Despite over $2.1 billion funding, the financial, legislative and administrative issues of the energy sector largely remained unresolved. The sector is still bleeding and circular debt has again piled up to over Rs400 billion by end of the last fiscal year. Circular debt resurged despite the government having cleared Rs480 billion in 2013.
The Ministry of Water and Power’s latest monitoring report on Energy Sector Reform Programme revealed that during the first half of last fiscal year 2016-17, recovery of electricity bills again slipped to 92.2%. The ratio was at 94.6% in June 2016. However, line losses marginally reduced from 17.9% to 17.2% during the same period. Still, these were significantly higher than the limits prescribed by the power sector regulator.
Pakistan’s electricity generation capacity is still about 5,500 megawatts short, and inadequate energy supply has been a constraint to the economy, according to a recent report of the ADB on the energy sector. Further, only two-thirds of the population has access to power, it added. Despite the improvements, persistent blackouts negatively affect investor confidence and economic growth, noted the ADB.
World Bank Country Director for Pakistan Illango tweeted on Tuesday that the Group approved $2 billion for public and privatisation investments in Pakistan between July 2016 and June 2017. Except for policy loans, the project loans will be disbursed during the coming years as work on these schemes progresses.
The spokesperson said that the fresh commitments included $736 million in International Development Association (IDA) – the concessionary arm of the bank, $390 million on account of International Bank for Reconstruction and Development (IBRD) and $71 million in Multi Donor Trust Fund operations. In addition, the International Finance Corporation (IFC) has delivered $800 million in long term (including mobilisation) and short term financing, said the spokesperson.
Illango said that Pakistan can be more ambitious in reforming its economy to create jobs that reduce poverty and boost shared prosperity.
As overall disbursements remained below the official projections during the past fiscal year, some projects of Punjab and Sindh also received less disbursement due to slow progress on them. Water Sector Capacity Building project disbursements remained nil. The disbursements against Balochistan Integrated Water Resources Project also suffered. Work on Sindh Enhancement Nutrition for Mother and Children project of World Bank could not progress as per plan.
The disbursements for Punjab Skills Development Project and Punjab Agriculture Productivity Improvement also fell behind the official estimates of the federal government. The work on Sindh Agriculture Growth Project, Sindh Public Sector Management Project and Sindh Integrated Agriculture Productivity Project slowly progressed.
The development on Balochistan Integrated Water Sector Project was also below satisfaction during the past one year.