Pakistan and IBRD lending

Pakistan cannot access the International Bank for Reconstruction and Development (IBRD) lending because of deteriorating macroeconomic indicators, so maintains the World Bank website. IBRD loans from the World Bank are non-concessional and not extended to those member countries that have a Gross National Income (GNI) of less than 1205 dollars in 2014 (defined as gross national income converted to international dollars using purchasing power parity) and calculated as the sum total of value-added by all resident producers plus any product taxes (minus subsidies) not included in the valuation of output plus net receipts of primary income (compensation of employees and property income) from abroad.
Thus the World Bank no longer uses the Gross National Product (GNP) to classify countries but GNI with four major categories: low income with GNI of 1035 dollars or less, lower middle income with GNI of 1,036 to 4,085 dollars; upper middle income with GNI of 4,086 to 12,615 dollars and high income with GNI of 12,616 dollars or more. There are blend countries which are eligible for concessional International Development Assistance (IDA) typically with little interest rate and payable over 25 to 40 years with a 5 to 10-year grace period as well as non-concessional IBRD. Pakistan is no longer a blend country but only an IDA eligible country while India is a blend country eligible for IDA because of its low per capita income. The rationale why countries seek IBRD is because IDA is limited though it has been rising over time with annual commitments at 16.3 billion dollars in June 2013 spanning some 160 projects with 15 percent of the total as grant assistance but with 50 percent earmarked for Africa. In addition IDA makes investment in social sectors more attractive for countries and hence there is an ongoing debate that the World Bank does not graduate countries like Into to IBRD only as that would reduce outlay on social sector development.
Pakistan according to the World Bank site is classified as a lower middle income country with the average 2012 GNI of 1260, though gross national income per capita is higher at 2880. In comparison India's GNI is 1580 with gross income per capita at 3910 and Sri Lanka's 2920 with gross national income per capita at 6030 while Bangladesh was lower at 840 with gross national income per capita at 2030 and Nepal at 700 with gross national income per capita at 1470.
Pakistan's 2012 GNI of 1260 is certainly above the cutoff point for eligibility of IBRD loans, thus one would be compelled to conclude that the major reason for our ineligibility lies' in the implementation of our reform programme to date that compromises, in the eyes of the World Bank, our capacity to repay the loans. There is no doubt that the major and perhaps the only positive factor with respect to GNI performance are remittance inflows that have been rising for the past four to five years in spite of the decline in value addition (with large scale manufacturing sector struggling to increase output because of security issues).
The failure of the PPP-led coalition government as well as the incumbent PML-N government to increase product taxes due to the statutory regulatory orders (SROs) that continue to exempt the rich and powerful from taxes while at the same time failing to enhance documentation of the economy are key contributing factors to a low GNI. True that the government has committed to the International Monetary Fund (IMF) under the 6.64 billion dollar Extended Fund Facility that it would take measures to eliminate SROs and enhance documentation yet the government retracted from these reforms in the current year and one hopes that it would not do so next year even though these reforms are extremely challenging politically. Or in other words the government must seek to implement pro-business policies, as noted in the second IMF staff review, and the stalled tax reform programme if it is to succeed in accessing IBRD loans again. The second IMF staff review dated March 2014 does note that "materialisation of risks to the macroeconomic outlook would...erode Pakistan's capacity to repay the Fund." It would be more appropriate for the government to focus on internal reforms that would strengthen key macroeconomic indicators rather than focusing on increasing debts through dollar bond issuance.