ISLAMABAD: Pakistan has decided to avail loans from World Bank (WB) for critical mega-development projects but not for the next phase of poverty alleviation as the current phase of the programme faces delays.
The finance ministry has, for now, turned down a request from the Pakistan Poverty Alleviation Fund (PPAF) for initiating dialogue with WB for PPAF-IV, senior officials said.
They said the government has decided to give priority to mega development projects only due to WB’s limited financing envelope.
The decision is in line with the recommendations of development sector experts who have been urging the government to avail foreign loans against only those projects which promise a high return on investment.
The new country partnership strategy of WB promises roughly $1.2bn per annum lending to Pakistan.
At the moment, the government’s priority is to complete the $4.2bn Dasu hydropower project with the help of WB.
The lender recently approved $588.4m for Dasu and gave guarantees against $480m borrowings.
The low penetration of microfinance institutions despite years of INVESTMENTS also remains a reason behind pushing additional financing for PPAF-IV on backburner, said the officials.
In the last fiscal year, WB disbursed $696m in project funding to Pakistan a figure that is expected to remain around $710m in the current financial year, forcing the government to prioritise its needs.
However, the possibility for getting funding at some later stage has not been ruled out, as the government intends to keep financing the operations of PPAF, said the officials.
PPAF was established in 1999 with the help of WB. However, the 15-year-old partnership has come to a phase where it needs a full review of the strategy due to flaws at the implementation stage.
“We have not received a request from the government for the funding of PPAF-IV”, said WB Communications Officer Mariam Altaf. She said at this stage, WB is focused on the implementation of the $250m PPAF-III phase, which will continue till September 30 next year.
Pakistan and WB signed the PPAF-III deal in June 2009 with a goal to achieve all the agreed targets and close the project by January 2015.
So far, WB has released $237.7 million, according to official documents of the Economic Affairs Division (EAD). It is not clear how much of the releases were actually spent on the ground.
Due to delays in implementation, WB has extended the closing period by eight months to September 2015, according to the latest WB report. So far WB has approved $890m for the PPAF including funding for activities in areas affected by the 2005 earthquake.
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