ISLAMABAD:
The government on Tuesday asked the World Bank for more time to implement its $ 1.5 billion loan eligibility conditions to meet growing external financing needs, sources told the Express Tribune.
Pakistan seeks three budget support loans, totaling $ 1.5 billion, from the World Bank before the end of June, they said, adding that the World Bank had set May 10 as the deadline. to implement the loan approval conditions.
Finance ministry officials said Finance Minister Shaukat Tarin held a virtual meeting with Axel van Trotsenburg, managing director (operations) of the World Bank, to review the status of the three planned loans.
Although a finance ministry document regarding the meeting does not mention discussions on the $ 1.5 billion loans, officials said the WB has set a May 10 deadline for the implementation of all conditions before loan approval by its board of directors during the last week of June.
The most difficult conditions were related to the increase in electricity tariffs, which the government was at this stage reluctant to implement after already raising prices twice in December and February.
Officials said the minister told the director general the government was trying to meet the deadline. Some of the conditions that will not be implemented by the deadline will be met before the loan approval request is considered by the WB board of directors, officials said.
“The Minister of Finance reiterated the government’s strong commitment to undertake reforms to achieve macroeconomic stability, strengthen fiscal resilience and stimulate economic recovery amid Covid-19 and in the post-Covid scenario,” it reads in the document.
The ministry document also cited Tarin as saying that the World Bank had always been a source of support in pursuing the reform program and implementing various development projects for the country. He also highlighted the steps to be taken for efficient resource mobilization, productivity improvement and financial management strengthening in the future, added the ministry.
The $ 1.5 billion loans are part of the overall need for $ 27 billion in external financing for the current fiscal year, according to finance ministry sources.
The government has asked the World Bank to provide $ 500 million each under the Resilient Institutions for a Sustainable Economy (RISE-II), Securing Human Investments for Transformation (SHIFT-II) and the Program for affordable and clean energy (PACE), they added.
Some of the conditions set by the World Bank are also part of the International Monetary Fund (IMF) program, which the Fund relaunched a month ago. To qualify for the loans, Pakistan would have to increase electricity prices by Rs 1.39 per unit in June and then Rs 2.21 per unit, a source said.
These two increases are also part of the IMF’s structural benchmarks. The government is also expected to introduce a new national electricity policy, a new low-cost power generation plan and a subsidy elimination plan.
The sources said that for the $ 500 million RISE loan, the World Bank made it a condition for provincial governments to issue a notification, adopting the Federal Board of Revenue (FBR) valuation tables for urban property taxes. in order to maintain the valuation ratio at 85% of the market. value.
The signing of performance contracts with the board of directors and management of all companies in the electricity sector is also part of the condition of the RISE loan.
There is also a condition that the federal and provincial finance departments should implement regulations, after the approval of common GST laws passed by federal and provincial assemblies to generate a harmonized GST on goods and services through the country.
According to yet another condition, the finance division would convert all bearer price obligations into registered instruments, through biometric identity verification; and the SECP will issue a notification on the establishment of a secure transaction guarantee registry to improve SMEs’ access to finance.
To obtain a $ 500 million SHIFT loan, provincial cabinets must approve a mechanism for the national harmonization of birth and death registration with the National Database and Registration Authority (NADRA) national registry. .
The finance ministry and provincial finance departments will also need to approve the inclusion of any remaining capital costs under the respective expanded immunization program in the recurrent budget.
Some of the conditions of the IMF program, such as eliminating non-standard preferential rates and tax exemptions, and raising these products to the standard rate of 17% are also part of the World Bank conditions for a loan of 1 , $ 5 billion.
The government will now hold an internal meeting to review the timelines for implementing all of these conditions.
The dependence of the PTI government on external loans has further increased due to increasing repayments of external loans which have exceeded $ 10 billion per year. The country pays interest on foreign loans by taking new foreign loans.
The Ministry of Finance said Energy Minister Hammad Azhar briefed the managing director of the World Bank on ongoing efforts in the energy sector to improve the efficiency of the system by eliminating inefficient power plants. to improve service delivery.
The Prime Minister’s Special Assistant (SAPM) on Electricity Tabish Gauhar highlighted the reforms introduced in the electricity sector to make it dynamic and sustainable. He reiterated the government’s strong determination to achieve efficiency in the production as well as in the transmission of electricity.
Gohar urged the Managing Director of the World Bank to appreciate the tough decisions Pakistan has already taken.
Van Trotsenburg reiterated his support for overcoming challenges in the energy sector and praised the socio-economic coverage extended to marginalized sections of society during the coronavirus pandemic, the finance ministry said.
He reaffirmed the Bank’s commitment to continue supporting the implementation of structural reforms in the future on this occasion, he added.
