ISLAMABAD: The World Bank has set strict prerequisites for $1.5 billion lendings. The conditions include an increase in electricity rates, the introduction of new power and tax policies. The conditions put the government in a difficult position as it is already seeking a review of the International Monetary Fund (IMF) deal.
The finance ministry sought three budget support loans totalling $1.5 billion from the World Bank before the end of June. The loans are part of the overall $27 billion external financing requirement for the current fiscal year.
The government has requested the World Bank to provide $500 million each under the Resilient Institutions for Sustainable Economy (RISE-II), Securing Human Investments to Foster Transformation (SHIFT-II) and Programme for Affordable and Clean Energy (PACE), said the sources.
Outgoing Finance Minister Hammad Azhar on Friday chaired a meeting to review the conditions that the World Bank had proposed for giving the loans. In the absence of non-debt creating inflows, the government’s reliance on foreign loans is deepening, and it has recently borrowed $2.5 billion by floating Eurobonds.
Resultantly, the State Bank of Pakistan’s $16 billion foreign currency reserves is the result of foreign loans, including $11 billion worth of lending by China in the shape of a safe deposit and currency swap agreement. The only silver lining is the remittances from overseas Pakistani workers growing at a pace of 25%.
Some of the World Bank conditions are also part of the IMF programme, which IMF revived three weeks ago, but the government is seeking to renegotiate it.
Newly-appointed Finance Minister Shaukat Tarin has said that he would renegotiate the IMF deal. Some of the IMF programme conditions like the elimination of nonstandard preferential rates and tax exemptions, and bringing those goods to the standard rate of 17% are also part of the World Bank conditions for $1.5 billion lendings.
The power secretary briefed the finance minister on Friday about the efforts being made for the reformation of the power sector with a view to providing maximum relief to the electricity consumers, according to the Finance Ministry handout.
