A positive gesture

It was good to know that while some of the multilateral financial institutions were reluctant to offer assistance to Pakistan due to a variety of reasons, World Bank continues to be actively engaged with the country and had no such inhibitions. According to its latest announcement, it has agreed to lend up to $5.5 billion to the country over three years under a new lending strategy focused on boosting the economy and helping the poorer, less integrated regions including the tribal areas near the Afghan border. The new strategy will cover the 2012 to 2014 fiscal years and include both loans and grants handouts. More importantly, projects in the FATA, a semi-autonomous tribal region, as well as Khyber Pakhtunkhwa and Balochistan on the Afghan border would be funded from a trust fund supported by 10 donor countries and the first round would involve initiatives to create jobs, emergency roads construction and revitalising health services. World Bank's Pakistan Director reiterated the Bank's view by saying that "we will continue our strong support to Pakistan, while keeping a keen eye on implementation to ensure that these efforts translate into real results on the ground". The World Bank, however, does not seem to be very satisfied with the recent performance of the economy. According to its "Country Partnership Strategy Progress Report FY 2010-2014", the real GDP of Pakistan was projected to expand by 3.9 percent and overall the macroeconomic risks continue to be significant. A range of governance, corruption and business environment indicators suggest that these areas remain a challenge. There are signs that poverty levels could be increasing due to a downturn in the economy, floods and inflation over the past two years. Supply expansion and improving reliability, efficiency of power and gas systems were central to Pakistan's development but the progress in these areas has been slow. A very pertinent observation of the Report was that, given the weak conditions for macroeconomic reforms, the Bank may not be able to provide budget support. However, it would remain engaged in supporting the Pakistan government on the critical issues of revenue mobilisation and power reform through analytical work, ongoing projects and exploring operations where disbursements were based on the achievement of results. Looking at the announcement of the World Bank and its comments on the economy of Pakistan, it seems that the Bank, unlike some other multilateral financial institutions, has not completely lost faith in the ability of the country's authorities to manage the economy reasonably and is prepared to extend its assistance under certain conditions that suggest closer and stricter monitoring of the projects than in the past. Such a positive statement was especially welcome at a time when the IMF's SBA was terminated in between and there was no probability of a new programme in the near term, with the result that other donors were also not interested in supporting the country. Economic woes of the country were also multiplying due to several other factors like higher than projected fiscal deficits, re-emergence of the current account deficit, lack of reform efforts and overall economic deterioration. Seen against this background, the promise of the World Bank's continued engagement with the country is definitely encouraging. Its announcement that it would not be able to provide budget support to the country should not be so much worrying for our policymakers because the Bank's main focus is usually on project financing rather than budget or balance of payments support. Its linking of disbursements to the achievement of results or closer involvement with the projects should also not be surprising. The rampant corruption and lack of good governance in the country has been so much propagated the world over that no institution is now prepared to repose its full faith in our integrity and efficiency to undertake various projects effectively. However, despite these deficiencies or blemishes and keeping in view the acute shortage of resources at present, we hope that the World Bank's assistance will not only provide much needed support to critical social services such as health and education but would also back infrastructure programmes aimed at creating jobs and restoring long-term growth. Particular focus on FATA and Balochistan will provide alternative sources of productive employment to the local youths and reduce terrorism in the country. Nevertheless, we would urge upon the authorities to concentrate fully on an appropriate reform programme in order to arrest the deteriorating economic conditions, accelerate the growth process with monetary stability and try to be self-reliant as soon as possible. We say this because disbursement policies of the multilateral financial institutions including the World Bank are generally guided by the developed countries, particularly the US. As such, the country cannot afford to remain dependent on the goodwill of an outside institution, influenced largely by countries who may have their own axes to grind. Copyright Business Recorder, 2011