World Bank and ADB Delay $ 1 Billion Loans

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ISLAMABAD:

Pakistan will receive only $ 800 million in budget support loans this month, as the two largest lenders delayed approving another $ 1 billion due to delays in meeting certain conditions and a deadlock in negotiations with the International Monetary Fund (IMF).

The World Bank will approve $ 800 million in political loans on June 28 against the original $ 1.5 billion plan, Treasury sources told The Express Tribune on Monday.

They added that Pakistan and the World Bank have agreed on three loans, each worth $ 500 million.

However, the World Bank delayed approving one loan – under the second Resilient Institutions for a Sustainable Economy (RISE-II) program – and cut the other two loans from $ 500 million to $ 400 million each under the Securing Human Investment Program. capital to drive change ”. (SHIFT-II) and the Affordable and Clean Energy Program (PACE), sources said.

The World Bank decided to cut the loan after Islamabad failed to meet certain conditions, sources said. Likewise, the Asian Development Bank (ADB) has postponed approval of the second tranche of its $ 300 million energy sector reform and financial sustainability program, finance ministry sources said.

The Ministry of Finance did not respond to a request for an official version.

The World Bank’s board plans to review a second series of SHIFT and PACE on June 28, a local bank official told The Express Tribune.

The spokesman said that “RISE-2 has been postponed to accommodate the processes required by the government to implement the reforms outlined in the program.”

In response to another question about the reduction in the size of loans, the spokeswoman added that the amount reflected was agreed jointly by the Government of Pakistan and the World Bank.

The delay will not negatively affect Pakistan’s position in the external sector in the short term due to the $ 16 billion in gross foreign exchange reserves, although these were mainly created through loans.

However, the rupee came under some pressure on Monday and lost 44 paise to Rs 156.18 per dollar.

Pakistan has already planned to receive $ 17 billion in external loans in the next fiscal year. However, the borrowing plan depends on the country’s ability to remain in the IMF program, which was reinstated just three months ago.

Sources say lengthy negotiations with the IMF also delayed the final disbursement of the two remaining loans, one each from the World Bank and ADB.

Talks between Pakistan and the IMF for the sixth program review were scheduled to end before the budget was announced.

However, the issue of raising taxes and raising electricity prices by another 46% is at an impasse. Finance Minister Shaukat Taryn said Saturday that the sixth review could be completed by September.

Some of the conditions included in the IMF plan were also included in the programs of the ADB and the World Bank. The World Bank imposed tough conditions, such as higher electricity tariffs and new energy and tax policies, which put the government in a quandary.

Sources said the $ 500 million RISE-II loan was delayed due to lack of progress on conditions such as the issuance of notices by provincial governments to adopt Federal Tax Council (FBR) valuation tables applicable to city property taxes to preserve valuation … coefficient at the level of 85% of the market value.

Signing performance agreements with the board of directors and management of all energy companies is also part of the terms of the RISE loan.

There is also a stipulation that federal and provincial finance departments must issue implementing regulations following the approval of general general sales tax (GST) laws passed by the federal and provincial assemblies to create a consistent GST for goods and services across the country.

“Operation (RISE-II) aims to strengthen financial and debt management institutions and intergovernmental mechanisms to enhance macro-fiscal stability,” the World Bank documents said.

RISE-II also supports reforms to improve the financial viability of the electricity sector by reducing and ultimately eliminating circular sector debt that was initiated under RISE-I.

It also aims to improve the investment climate through the implementation of a nationwide harmonized GST, a competitive national tariff policy, an inclusive digital payment system that allows fintech companies to conduct e-money transactions, and a more regulated banking system, according to World Bank.

Posted in The Express Tribune June 15th.hour, 2021

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