The World Bank has restored Pakistan’s budgetary support after four years and approved a policy loan of $500 million to help the cash-strapped country mitigate the adverse impact of the coronavirus pandemic, according to a media report.
The World Bank’s board of executive directors on Friday approved a $ 500-million program to help Pakistan improve access to quality healthcare and education, support economic opportunities for women and strengthen social safety nets as the country braces to limit the impact of the COVID-19 pandemic, the Express Tribune reported, citing a statement by the local office of the Washington-based lending agency.
“Political risks are high because COVID-19 response adds uncertainty to the relations among the federating units,” said the World Bank documents.
The lender warned that elite capture would continue to be challenging with more demand placed for concessions that could erode fiscal space. However, it delayed the approval of another $500-million loan due to a lack of consensus on the conditions regarding the restructuring of Pakistan’s Debt Policy Coordination Office, reforms in state-owned enterprises and enforcement of a new national fiscal framework.
The World Bank country office did not send the second $500-million loan request for the Resilient Institutions for Sustainable Economy program for board approval. The Securing Human Investments to Foster Transformation program worth $500 million is the first budget support since February 2016.
The World Bank had suspended Pakistan’s budget support loans due to the deterioration in macroeconomic indicators in 2017. Initially, the size of SHIFT was $250 million, which the World Bank decided to double after the COVID-19 outbreak.
Pakistan will repay the $500-million loan in 30 years and it is financed by the World Bank’s concessionary arm the International Development Association.
Historically, project loans have remained more effective than policy loans as successive governments have failed to fully implement reforms after the disbursement of policy loans, the daily said. SHIFT would improve the targeted safety net programs that would benefit 12 million people impacted by the COVID-19 crisis, both at the federal and provincial levels, said the World Bank.
“The global COVID-19 pandemic is impacting day-to-day life in Pakistan — not solely from economic disruptions but also additional stress on public services that jeopardise human capital accumulation,” said World Bank Country Director for Pakistan Illango Patchamuthu.
This programme underscored the criticality of universal healthcare and social protection services that were durable to exogenous shocks such as that Pakistan was facing now, he added. — PTI