Pakistan does not enjoy a good reputation in utilizing the multilateral loans for the purpose for which these are granted. According to a report of the Independent Evaluation Group (IEG) of the World Bank, two policy loans - dollar 400 million in May 2014 and dollar 500 million in June 2015 - were approved largely to help the then PML-N government put the economy on a sustainable path of development and ensure inclusive economic growth but these goals were not fully achieved due to flawed plans and institutional capacity constraints. The IEG, nonetheless, declared the performance of these "Fiscally Sustainable and Inclusive Growth Development Policy Credits" moderately satisfactory. The findings of the IEG report also underpinned apprehensions that the money was simply used to increase foreign exchange reserves and finance the budget as most of the programme targets could not be achieved. The report found some serious shortcomings in programme designs. For instance, programme documents did not explain how the set of five measures to foster private and financial sector development were selected from a long list of feasible and relevant interventions. Capacity of the government agencies to implement elements of the programme was also not well vetted. Besides, the IEG underlined that the condition of passage of the Credit Bureau Act which was a lower priority measure was included in the programme because its legislation was ready for approval of the Parliament.
It may be mentioned here that the reports of the IEG are quite comprehensive and useful documents to gauge the success of a World Bank programme. Their utility is all the more noticeable because the IEG works independently of the World Bank management and reports directly to the Executive Board. Talking about the weaknesses of the above two programmes, the IEG noted that though the privatisation condition was also attached, the Privatisation Commission's ability to implement the programme was overestimated. There was "no operational definition of privatisation or the strategic sale of equity" and the World Bank and Pakistan treated divestment at stock exchange and strategic sale of an entity to private sector alike. The Privatisation Commission was inadequately staffed, had little experience with privatisation transactions and did not seem to understand how to complete the prior actions corresponding to the programme. As such, targets of the programme were generally missed. For instance, one of the conditions was to lower trade tariffs and tariff exemptions to improve competitiveness and innovation. But the aim of reducing protection was not achieved. Despite a reduction in statutory tariff rates, the number of tariff lines that were subject to regulatory duties rose from 105 in 2013 to 568 in 2014 and the percentage of imports paying regulatory duties rose from 0.6% to 9.7 percent in the same period. The target to raise the number of unconditional cash transfer beneficiaries of BISP from 4.4 million to at least 5.5 million was also not met.
We feel that the comments of the IEG of the World Bank are without prejudice and are also mostly applicable to other programmes between Pakistan and other multilateral institutions. For instance, this was quite evident from the previous programme with the IMF when the Fund had to grant waivers almost every time the tranche of the programme was to be released. Even if some conditionalities were fulfilled, these were met on paper and not in line with the spirit of the programme. That is why the ultimate target of stabilising the economy and fostering its growth was not achieved with the result that the authorities of the country had to knock the door of another or the same multilateral agency once again. But all the blame cannot be put on Pakistani authorities as the staff of multilateral agencies is equally responsible for designing the programme without understanding the ground realities. For instance, the privatisation of SOEs is included in various programmes without realising that such an action will not find favour with the public and does not enjoy popular support. Also, it will not be wrong to say that authorities of the country generally approach the multilateral institutions to enhance the country's foreign exchange reserves and finance its budget rather than making structural reforms with outside help. Such an approach is, of course, short-sighted as it will overburden the country with debt without raising the productivity of the economy on a sustained basis.