World Bank suspends financial support under PRSP: another serious blow on economic front

Pakistan suffered another serious blow on the economic front as the World Bank suspended its financial support under Poverty Reduction Support Programme (PRSP) resulting in depriving Islamabad of much-needed $300 million in the current fiscal year. The World Bank has suspended Pakistan's financial support for poverty related project on failure of Islamabad in meeting criteria set for the release of funds for PRSP.
The World Bank's decision is of serious nature for Pakistan, which is already under huge financial pressure after the International Monetary Fund (IMF) decision of holding back two instalments under the standby arrangement (SBA).
Sources in the Finance Ministry said PRSP was to bring $300 million for Pakistan by June 2011 and much of the money for poverty-related scheme was to be released after receiving $300 million from the donor. However, Pakistan government failure in collecting data on poverty and some other key conditionalities attached with the programme has resulted in suspension of the financial support from the World Bank under PRSP programme. The World Bank's decision of suspending financial support under the PRSP can also add to Islamabad's economic woes as some other donors and bilateral partners like Japan can also review their programme for poverty related and social sector programme for Pakistan. At least Japan can follow the World Bank in suspension of financial support for Pakistan under PRSP type poverty elimination projects. Japan after the donors like the World Bank is a major supporter for Pakistan providing financial support for poverty reduction but it follows the World Bank's mood for release of funds to Pakistan. Keeping in view the past practice the government is communicating with the government of Japan through its ambassador in Islamabad to convince it to delink its programme for financial support for poverty related programme from the World Bank so that Islamabad does not suffer more setbacks like one from the World Bank.
The World Bank's support for Pakistan under PRSP is of more significance than simply a few hundred million dollars. It actually works as a grantee for other donor agencies like Asian Development Bank (ADB) and many other multinational donors. For this reason the World Bank's action of suspending financial support to it under PRSP is worrying the government economic managers. Some senior officials of the Finance Ministry link recent visit of Japan's ambassador to Islamabad to different government departments including the Finance Ministry in the same context. It is widely believed that the Finance Ministry officials are making serious damage control efforts in securing some financial support from Japan and other available channels to mitigate the impact of the WB decision of suspending financial support for Pakistan's PRSP.